Question 1

The current ratio is one measure of the adequacy of a company's working capital.

Accepted Answer

A) True 
 B)False  True

Question 2

What is vertical analysis?

Accepted Answer

Vertical analysis or common size analysis are cross sectional ratios.The components of the years' financial information are compared to a base.For example,the base for the balance sheet may be total assets.

Question 3

Where there is a deficit in total owners' equity,the ratio of total liabilities to total assets will be greater than 1 to 1; e.g.,1.2 to 1.

Accepted Answer

A) True 
 B)False  False

Question 4

What is the purpose of consolidated financial statements?

Accepted Answer

The answer of What is the purpose of consolidated financial...

Question 5

Which of the following is not known as a solvency ratio?

Accepted Answer

A)   Debt-to-equity
B)   Times interest earned
C)   Debt-to-total assets
D)   Defensive-interval ratio

Question 6

All of the following may be included in the numerator of the debt-to-equity ratio except:

Accepted Answer

A)   Short-term bank loans.
B)   Retractable preferred shares.
C)   Current portion of long-term debt.
D)   Shareholder loans.

Question 7

The "best" opinion that an auditor can give is a(n):

Accepted Answer

A)   adverse opinion.
B)   unqualified opinion.
C)   qualified opinion.
D)   disclaimer of opinion.
E)   unqualified opinion and disclaimer of opinion are equally good.

Question 8

There are certain situations where it is necessary to recast the financial statements in order to analyze them.All of the following are examples of the need to recast except:

Accepted Answer

A)   The income statement contains a number of gains not expected to occur in the future.
B)   There have been a number of temporary differences. They remain on the balance sheet.
C)   Asset purchases were made during the year.
D)   Interest on long-term debt amounted to $1,000,000.

Question 9

In a popular business journal,JMR Ltd.financial data for the last five years was compared.This is an example of:

Accepted Answer

A)   Cross-sectional comparison.
B)   Yearly comparison.
C)   Longitudinal comparison.
D)   Industrial comparison.

Question 10

Quick assets,as usually defined,include:

Accepted Answer

A)   cash, accounts receivable, short-term investments in marketable securities, only.
B)   cash, accounts receivable, short-term investments in marketable securities, and inventories.
C)   cash only.
D)   cash and accounts receivable only.
E)   None of these choices are correct.

Question 11

An unqualified opinion is given if an audit has not been completed.

Accepted Answer

A) True 
 B)False

Question 12

All of the following are examples of contractual decisions except:

Accepted Answer

A)   negotiating collective agreements.
B)   accepting employment.
C)   ability to withstand competition.
D)   entering into a joint venture.

Question 13

HIJ reported the following data for 2014 in 000's:  Assuming vertical analysis,what is the relationship between current assets,operational assets,and other assets,respectively? (Rounded to the nearest percent)

Accepted Answer

A)   Choice 1
B)   Choice 2
C)   Choice 3
D)   Choice 4
E)   Choice 5

Question 14

Generally,an acid-test ratio of 2 to 1 is preferable to a working capital ratio of 2 to 1.

Accepted Answer

A) True 
 B)False

Question 15

What do solvency ratios measure?

Accepted Answer

The answer of What do solvency ratios measure?...

Question 16

The rule of thumb for the current ratio is 2:1.When would a current ratio below this threshold not necessarily be a concern for a company?

Accepted Answer

A)   When accounts receivable balances are high
B)   When cash flows are steady and reliable
C)   When inventories are high
D)   None of these choices are correct

Question 17

A company which offers "n/30" credit terms would be expected to have a receivable turnover of about 12 times a year.

Accepted Answer

A) True 
 B)False

Question 18

The main place to look for clues as to management's reporting objectives is:

Accepted Answer

A)   in the financial statements.
B)   in the management discussion and analysis section.
C)   in the financial statement highlights.
D)   in the notes to the financial statements.

Question 19

Longitudinal comparisons compare a company's performance over time to that of its competitors while cross-sectional comparisons compare a company's own performance from one period to another.

Accepted Answer

A) True 
 B)False

Question 20

IFRS standards require the presentation of comparative financial statements by most companies for the current year as well as:

Accepted Answer

A)   one preceding year.
B)   three succeeding years.
C)   two preceding years.
D)   three preceding years.
E)   four preceding years.

Exam 11: Financial Instruments: Investments in Bonds and Equity Securities

The current ratio is one measure of the adequacy of a company's working capital.

What is vertical analysis?

Where there is a deficit in total owners' equity,the ratio of total liabilities to total assets will be greater than 1 to 1; e.g.,1.2 to 1.

What is the purpose of consolidated financial statements?

Which of the following is not known as a solvency ratio?

All of the following may be included in the numerator of the debt-to-equity ratio except:

The "best" opinion that an auditor can give is a(n) :

There are certain situations where it is necessary to recast the financial statements in order to analyze them.All of the following are examples of the need to recast except:

In a popular business journal,JMR Ltd.financial data for the last five years was compared.This is an example of:

Quick assets,as usually defined,include:

An unqualified opinion is given if an audit has not been completed.

All of the following are examples of contractual decisions except:

HIJ reported the following data for 2014 in 000's: Assuming vertical analysis,what is the relationship between current assets,operational assets,and other assets,respectively? (Rounded to the nearest percent)

Generally,an acid-test ratio of 2 to 1 is preferable to a working capital ratio of 2 to 1.

What do solvency ratios measure?

The rule of thumb for the current ratio is 2:1.When would a current ratio below this threshold not necessarily be a concern for a company?

A company which offers "n/30" credit terms would be expected to have a receivable turnover of about 12 times a year.

The main place to look for clues as to management's reporting objectives is:

Longitudinal comparisons compare a company's performance over time to that of its competitors while cross-sectional comparisons compare a company's own performance from one period to another.

IFRS standards require the presentation of comparative financial statements by most companies for the current year as well as: