Question 1

The tools for studying industry economics does not include:

Accepted Answer

A)  Value chain analysis 
B)  Classification using Porter's five forces 
C)  Classification of cash flows 
D)  Economic attributes framework

Question 2

The second step in financial statement analysis is to identify the company strategy.Which of the following is a question an analyst should ask when performing a strategy analysis?

Accepted Answer

A)  Are industry sales growing rapidly or slowly? 
B)  Do earnings include revenues that appear mismatched with the business model employed by the firm? 
C)  Does the industry include a large number of firms selling similar products? 
D)  What is the company's degree of geographical diversification?

Question 3

What is the principal activity of security analysts?

Accepted Answer

A)  To assign credit ratings. 
B)  To apply IFRS adjustments. 
C)  To value firms. 
D)  To assess the need for audits.

Question 4

When identifying the strategies that a particular firm pursues to gain a competitive advantage it is important to determine if its products are designed to meet the needs of a specific market segment or are they intended for a(n)_____________________________________________.

Accepted Answer

The answer of When identifying the strategies that a particular...

Question 5

What is comprehensive income?

Accepted Answer

The answer of What is comprehensive income?...

Question 6

Which of the following is not an activity reported in the Statement of cash Flows?

Accepted Answer

A)  Operating 
B)  Investing 
C)  Manufacturing 
D)  Financing

Question 7

Which of the following is not an expense of a business?

Accepted Answer

A)  Depreciation 
B)  Dividends 
C)  Salaries 
D)  Advertising

Question 8

Extraordinary gains and losses arise from events that have all the following characteristics except:

Accepted Answer

A)  They are unusual given the nature of the firm's activity. 
B)  They are nonrecurring. 
C)  They are material in amount. 
D)  They result from terminated involvement in a line of business.

Question 9

Which of the following activities is an operating activity?

Accepted Answer

A)  Collections of accounts receivable. 
B)  Investing in equity securities of other companies. 
C)  Payment of dividends. 
D)  Issuing common stock

Question 10

Which form does the balance sheet equation take in the United Kingdom?

Accepted Answer

A)  Noncurrent Assets + Noncurrent Liabilities = Shareholders' Equity 
B)  Revenues - Expenses = Shareholders' Equity 
C)  Noncurrent Assets + [Current assets - Current Liabilities] - Noncurrent Liabilities = Shareholders' Equity 
D)  Noncurrent Assets - Current assets = Noncurrent Liabilities - Current Liabilities + Shareholders' Equity

Question 11

Which of the following economic characteristics is consistent with a commercial bank?

Accepted Answer

A)  Low barriers to entry. 
B)  High levels of research and development. 
C)  Low profit margin on lending activities. 
D)  Low profit margin on fee-based financial services,such as merger consulting.

Question 12

What are the six interconnected activities related to financial statement analysis?

Accepted Answer

The answer of What are the six interconnected activities related...

Question 13

What is the rationale for the statement of cash flows?

Accepted Answer

The answer of What is the rationale for the statement...

Question 14

Accounts payable represent:

Accepted Answer

A)  Amounts which are due to stockholders. 
B)  Amounts which have been borrowed to finance operations. 
C)  Amounts which are owed to the company by its customers resulting from credit sales. 
D)  Amounts which are owed by the company to its suppliers for past purchases.

Question 15

Which of the following is an independent entity comprising 15 members and a full-time professional staff that specifies acceptable accounting principles known as IFRS?

Accepted Answer

A)  FASB 
B)  IASB 
C)  SEC 
D)  GAAP

Question 16

Which of the following economic characteristics is consistent with a grocery store chain?

Accepted Answer

A)  Low barriers to entry. 
B)  High levels of research and development. 
C)  High profit margins. 
D)  Low capital intensity.

Question 17

Which of the following would not inhibit new entrants into a market?

Accepted Answer

A)  Existing technological expertise. 
B)  Large required capital investment. 
C)  Lack of rivalry among current participants. 
D)  Existing patented technology.

Question 18

Which of the following would not appear as a liability on the balance sheet?

Accepted Answer

A)  A labor contract 
B)  A note due to a bank 
C)  Salary due employees at year-end 
D)  Accounts payable

Question 19

Cash and cash equivalents are considered ____________________ assets.

Accepted Answer

The answer of Cash and cash equivalents are considered ____________________...

Question 20

Which two organizations are working together to harmonize financial reporting worldwide?

Accepted Answer

A)  FASB and IASB 
B)  GAAP and FASB 
C)  SEC and FASB 
D)  EU and SEC

Exam 1: Overview of Financial Reporting,financial Statement Analysis,and Valuation