Test
Financial Statement Analysis- An Introduction
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Preguntas del test (76)
1Which of the following is least likely to be considered a role of financial statement analysis?
- ADetermining whether to invest in the company's securities.
- BAssessing the management skill of the company's executives.
- CTo make economic decisions.
2A company collects cash from a customer to settle an account receivable. What effect does this transaction have on the
company's total assets and total shareholders' equity?
Assets Equity- AIncrease Increase
- BNo effect Increase
- CNo effect No effect
3The Management Discussion and Analysis (MD&A) portion of the financial statements:
- Ais not required by the SEC.
- Bincludes such items as discontinued operations, extraordinary items, and other
unusual or infrequent events. - Cincludes audited disclosures that help explain the information summarized in the
financial statements.
4In the expanded form of the accounting equation, assets equal liabilities plus contributed capital plus:
- Aending retained earnings minus beginning retained earnings.
- Bbeginning retained earnings plus revenue minus expenses.
- Cending retained earnings.
5According to the IASB, which of the following least accurately describes financial reporting? Financial reporting:
- Aprovides information about changes in financial position of an entity.
- Buses the information in a company's financial statements to make economic decisions.
- Cis useful to a wide range of users.
6Alpha Company reported the following financial statement information:
December 31, 2006:
Assets $70,000
Liabilities 45,000
December 31, 2007:
Assets 82,000
Liabilities 55,000
During 2007:
Stockholder investments 3,000
Net income ?
Dividends 6,000
Calculate Alpha's net income for the year ended December 31, 2007 and the change in stockholders' equity for the year
ended December 31, 2007.
Net income Change in stockholders' equity- A$5,000
$2,000
decrease - B($3,000)
$2,000
increase - C$5,000
$2,000
increase
- A$5,000
7What is the fundamental balance sheet equation?
- AAssets = Liabilities + Stockholders' Equity (A = L + E).
- BLiabilities = Assets + Stockholders' Equity (L = A + E).
- CAssets = Stockholders' Equity Liabilities
(A = E L).
8Prema Singh is the bookkeeper for Octabius Industries. Singh has been asked by the CFO of Octabius to review all purchases
that occurred between February 1 and February 8 to investigate an error on the receiving dock. Singh will most likely look at
the:- Ainitial trial balance.
- Bgeneral ledger.
- Cgeneral journal.
9Beta Company reported the following financial statement information:
December 31, 2006:
Assets $58,000
Liabilities 28,000
December 31, 2007:
Assets ?
Liabilities 38,000
During 2007:
Stockholder investments 15,500
Net income 18,000
Dividends 7,750
Calculate Beta's total assets and stockholders' equity as of December 31, 2007.
Total assets Stockholders' equity- A$93,750 $30,000
- B$93,750 $55,750
- C$79,250 $55,750
10An accounting entry that updates the historical cost of an asset to current market levels is best described as:
- Aa contra account.
- Ba valuation adjustment.
- Caccumulated depreciation.
11Which of the following financial reporting choices is permitted under IFRS but not under U.S. GAAP?
- ANetting deferred tax assets with deferred tax liabilities.
- BExcluding actuarial gains and losses from balance sheet pension items.
- CRevaluing plant and equipment upward.
12Accruals are best described as requiring an accounting entry:
- Awhen the earliest event in a transaction occurs.
- Bonly when a good or service has been provided.
- Cwhen an expense has been incurred.
13Which of the following statements represents information at a specific point in time?
- AThe income statement and the balance sheet.
- BThe balance sheet.
- CThe income statement.
14Which of the following statements about proxy statements is least accurate? Proxy statements are:
- Aa good source of information about the qualifications of board members and
management. - Bavailable on the EDGAR web site.
- Cnot filed with the SEC.
- Aa good source of information about the qualifications of board members and
15When a publicly traded U.S. company prepares a proxy statement for its shareholders prior to the annual meeting or other
shareholder vote, it also files the statement with the SEC as Form:- A144.
- BDEF14A.
- C8K.
16Which of the following is an analyst least likely to rely on as objective information to include in a company analysis?
- AGovernment agency statistical data on the economy and the company's
industry. - BProxy statements.
- CCorporate press releases.
- AGovernment agency statistical data on the economy and the company's
17Wichita Corporation reported the following balances as of December 31, 2007:
Cash $?
Accounts payable 16,000
Accounts receivable 58,000
Additional paidin
capital 42,000
Common stock 19,600
Inventory 12,000
Plant and equipment 26,800
Notes payable 20,000
Retained earnings 32,000
Calculate Wichita's cash and total assets as of December 31, 2007 based only on these entries.
Cash Total assets- A$32,800 $129,600
- B$32,800 $113,600
- C$16,000 $129,600
18A firm engages in a new type of financial transaction that has a material effect on its earnings. An analyst should most likely be
suspicious of the new transaction if:- Athe transaction is not governed by existing regulations.
- Bno accounting standard exists that applies to the transaction.
- Cmanagement has not explained its business purpose.
19Reading the footnotes to a company's financial statements and the Management Discussion & Analysis is least likely to help
an analyst determine:- Ahow well the financial statements reflect the company's true performance.
- Bthe various accruals, adjustments and assumptions that went into the financial
statements. - Cthe detailed information that underlies the company's accounting system.
20Which of the following financial reporting choices is permitted under IFRS but not under U.S. GAAP?
- ANetting deferred tax assets with deferred tax liabilities.
- BRevaluing plant and equipment upward.
- CExcluding actuarial gains and losses from balance sheet pension items.
21Information about a company's financial position at a point in time is most likely found in the:
- Aincome statement.
- Bbalance sheet.
- Ccash flow statement.
22Allowance for bad debts and investment in affiliates are most likely to be shown as what types of accounts?
Allowance for bad debts Investment in affiliates- ALiabilities Asset
- BContraasset
Asset - CContraasset
Liabilities
23Characteristics of a coherent financial reporting framework are best described as:
- Amateriality, comprehensiveness, and aggregation.
- Bconsistency, materiality, and transparency.
- Ctransparency, consistency, and comprehensiveness.
24Which of the following would NOT require an explanatory paragraph added to the auditors' report?
- AStatements that the financial information was prepared according to GAAP.
- BDoubt regarding the "going concern" assumption.
- CUncertainty due to litigation.
25Accumulated depreciation and treasury stock are most likely to be shown as what types of accounts?
Accumulated Treasury stock
depreciation- ALiability Equity
- BContraasset
Contraequity - CContraasset
Contraequity
26Professional organizations of accountants and auditors that establish financial reporting standards are called:
- ARegulatory authorities.
- BInternational organizations of securities commissions.
- CStandard setting bodies.
27Management disclosure of the likely impact of implementing recently issued accounting standards is least likely to:
- Aconclude that the standard will not affect the financial statements materially.
- Bconclude that the standard does not apply.
- Cstate that the impact of the standard is impossible to determine.
28The Management Discussion and Analysis (MD&A) portion of the financial disclosure is least likely required to discuss:
- Acapital resources and liquidity.
- Bunusual or infrequent items.
- Cresults of operations.
29Which of the following statements about financial statement analysis and reporting is least accurate?
- AProviding information about changes in a company's financial position is a role
of financial reporting. - BDeciding whether to recommend a company's securities to investors is a role of
financial statement analysis. - CFinancial statement analysis focuses on the way companies show their financial
performance to investors by preparing and presenting financial statements.
- AProviding information about changes in a company's financial position is a role
30According to the IASB conceptual framework, characteristics that enhance relevance and faithful representation include:
- Acomparability and thoroughness.
- Btimeliness and verifiability.
- Cassurance and understandability.
31In the financial statement analysis framework, using the data to address the objectives of the analysis and deciding what
conclusions or recommendations the information supports is best described as:- Aanalyzing and interpreting the data.
- Breporting the conclusions.
- Cprocessing the data.
32Jack Rivers is an investment analyst for the equity fund of a family office. The head of the family, Charlotte Blackmon, is
concerned that management may be manipulating the earnings of some of the companies that the fund invests in. Rivers
explains to Blackmon, "Even though we don't have access to the detailed transactions that underlie the financial statements,
we can be sure that management is not manipulating earnings because I read the footnotes to the financial statements of
every company we invest in. The footnotes would disclose any deviation from appropriate accounting parameters." Rivers is:- Acorrect.
- Bincorrect because even within appropriate accounting parameters, management can
manipulate earnings through the assumptions that rely on their discretion. - CFinancial statements could potentially take any form if reporting standards didn't exist.
33Which of the following statements about financial statements and reporting standards is least accurate?
- AReporting standards focus mostly on format and presentation and allow
management wide latitude in assumptions. - BThe objective of financial statements is to provide economic decision makers with
useful information. - CFinancial statements could potentially take any form if reporting standards didn't exist.
- AReporting standards focus mostly on format and presentation and allow
34Which of the following is the least likely to be considered an accrual for accounting purposes?
- AUnearned revenue.
- BAccumulated depreciation.
- CWages payable.
35Washburn Motors signs a contract to sell a $100,000 luxury sedan to be delivered next month, and receives a $20,000 cash
down payment from the buyer. How will the transaction most likely affect Washburn's assets and liabilities?
Assets Liabilities- AIncrease Unchanged
- BIncrease Increase
- CUnchanged Unchanged
36Making a profitable sale on credit is most likely to have which of the following effects?
- AIncrease assets and decrease liabilities.
- BIncrease assets and increase equity.
- CDecrease assets and increase equity.
37Which of the following is an independent auditor least likely to do with respect to a company's financial statements?
- APrepare and accept responsibility for them.
- BProvide an opinion concerning their fairness and reliability.
- CConfirm assets and liabilities contained in them.
38A listing of all the firm's journal entries by date is called the:
- Aadjusted trial balance.
- Bgeneral ledger.
- Cgeneral journal.
39In addition to the audited financial statements included in a firm's annual report, which of the following sources of information is
most likely to contain audited data?- AFootnotes to the annual financial statements.
- BManagement's commentary.
- CInterim financial statements filed with the SEC.
40Which of the following is a company least likely required to present according to International Accounting Standard (IAS) No.
1?- AStatement of changes in owners' equity.
- BA summary of accounting policies.
- CDisclosures of material events.
41An analyst is least likely to use disclosures of accounting policies and estimates to evaluate:
- Awhether the disclosures have changed since the prior period.
- Bwhat policies are likely to be modified in future periods.
- Cwhat policies are discussed.
42According to the IASB Conceptual Framework for Financial Reporting, one of the qualitative characteristics of financial
statements is:- Agoing concern.
- Bfaithful representation.
- Ctimeliness.
43The best description of the general ledger is that it:
- Agroups accounts into the categories that are presented in the financial
statements. - Bis where journal entries are first recorded.
- Csorts the entries in the general journal by account.
- Agroups accounts into the categories that are presented in the financial
44A company's chart of accounts is:
- Athe set of journal entries that makes up the components of owners' equity.
- Ba detailed list of the accounts that make up the five financial statement elements
- Cused for entries that offset other accounts.
45The term "convergence" is most accurately used to describe:
- Athe reduction of the premium on a bond as it nears maturity.
- Bthe process of developing one universally accepted set of accounting standards.
- Cwhen expected return and required return are equal.
46Which of the following is least likely a qualitative characteristic accounting information must possess in order to provide useful
information to an analyst, according to the IASB Conceptual Framework?- AFaithful representation.
- BRelevance.
- CConservatism.
47Which of the following is the best description of the flow of information in an accounting system?
- AJournal entries, general ledger, trial balance, financial statements.
- BTrial balance, general ledger, general journal, financial statements.
- CGeneral ledger, trial balance, general journal, financial statements.
48A furniture store acquires a set of chairs for $750 cash and sells them for $1000 cash. These transactions are most likely to
affect which accounts?
Purchase Sale- AAssets only Assets, revenue, expenses, owners' equity
- BAssets and expenses Assets, revenue, expenses, owners' equity
- CAssets only Assets and revenues only
- AAssets only Assets, revenue, expenses, owners' equity
49Disagreements that inhibit development of a coherent financial reporting framework are least likely to involve which of the
following?- AStandard setting.
- BTransparency.
- CValuation.
50Which of the following statements regarding footnotes to the financial statements is least accurate?
- AFootnotes may contain information regarding contingent losses.
- BFootnotes provide information about assumptions and estimates used by
management. - CSome supplementary schedules are audited whereas footnotes are not audited.
51Which of the following is least likely to be considered a characteristic of a coherent financial reporting framework?
- ATransparency.
- BStability.
- CComprehensiveness.
52The step in the financial statement analysis framework that includes making any appropriate adjustments to the financial
statements and calculating ratios is best described as:- Agathering the data.
- Bprocessing the data.
- Canalyzing and interpreting the data.
53A company's operating revenues for a reporting period are most likely to be shown on its:
- Acash flow statement.
- Bbalance sheet.
- Cincome statement.
54Two underlying assumptions of financial statements, according to the IASB conceptual framework, are:
- Agoing concern and accrual accounting.
- Baccrual accounting and historical cost.
- Chistorical cost and going concern.
55Which of the following best describes financial reporting and financial statement analysis?
- AFinancial reporting refers to how companies show their financial performance
and financial analysis refers to using the information to make economic
decisions. - BThe objective of financial analysis is to provide information about the financial position
of an entity that is useful to a wide range of users. - CFinancial reports assess a company's past performance in order to draw conclusions
about the company's ability to generate cash and profits in the future.
- AFinancial reporting refers to how companies show their financial performance
56The purchase of equipment for $25,000 cash is most likely to be recorded as:
- Aan increase in an asset account and an increase in a liability account.
- Ban increase in one asset account and a decrease in another asset account.
- Can increase in two asset accounts.
57An analyst can find a company's accounting policies that require significant judgement or estimates in:
- Aboth the footnotes to the financial statements and Management's Discussion
and Analysis. - Bonly the footnotes.
- Cboth the footnotes and in the auditor's opinion.
- Aboth the footnotes to the financial statements and Management's Discussion
58Which of the following least accurately describes a correct use of doubleentry
accounting?- AA decrease in a liability account may be balanced by a decrease in another
liability account. - BA transaction may be recorded in more than two accounts.
- CAn increase in an asset account may be balanced by an increase in an owner's equity
account.
- AA decrease in a liability account may be balanced by a decrease in another
59Under which framework for financial reporting systems are the financial statement elements related to performance defined as
revenues, expenses, gains, losses, and comprehensive income?- AFASB framework.
- BBoth IASB and FASB frameworks.
- CIASB framework.
60The step in the financial statement analysis framework of "processing the data" is least likely to include which activity?
- AMaking appropriate adjustments to the financial statements.
- BAcquiring the company's financial statements.
- CPreparing exhibits such as graphs.
61Which description of the objective of financial statements is most accurate? The objective of financial statements is:
- Ato provide a wide range of users with information about a firm's financial
prospects. - Bto provide economic decision makers with useful information about a firm's financial
performance and changes in financial position.
to provide securities analysts with objective data about - Cto provide securities analysts with objective data about a firm's financial prospects.
- Ato provide a wide range of users with information about a firm's financial
62Sergey Martinenko is an investment analyst with Profis, Martinenko and Verona. He is explaining to his new assistant, John
Stevenson, why it is crucial for an investment analyst to read the footnotes to a firm's financial statement and the Management
Discussion and Analysis (MD&A) before making an investment decision. Which rationale is Martinenko least likely to provide to
Stevenson regarding the importance of analyzing the footnotes and MD&A?- AThe footnotes disclose whether or not the company is adhering to GAAP.
- BEvaluating the footnotes helps the analyst assess whether management is
manipulating earnings. - CAccruals, adjustments and assumptions are often explained in the footnotes and
MD&A.
63According to the IFRS framework, timeliness is a characteristic that enhances:
- Afaithful representation.
- Brelevance.
- Cboth relevance and faithful representation
64Which of the following is least likely to be considered a stated goal of the International Accounting Standards Board (IASB)?
- ADevelop global accounting standards requiring transparency, comparability,
and high quality in financial statements. - BRemain neutral in the debate on the use of global accounting standards to avoid
appearance of a conflict of interest. - CAccount for the needs of emerging markets and small firms when implementing global
accounting standards.
- ADevelop global accounting standards requiring transparency, comparability,
65Regarding the use of financial statements in security analysis and selection, it would be most accurate to say that:
- Aanalysts can verify the accuracy of financial statements by using a firm's
detailed accounting system information. - Bfurther analysis of a firm's financial statements is typically not necessary if the firm has
conformed to applicable accounting principles. - Canalysts can use footnotes and Management's Discussion and Analysis to better
understand assumptions used in the financial statements.
- Aanalysts can verify the accuracy of financial statements by using a firm's
66Which of the following is most likely to be considered a barrier to developing one universally recognized set of reporting
standards?- AReluctance of firms to adhere to a single set of reporting standards.
- BDifferent standardsetting
bodies of different countries disagree on the best treatment
of a particular issue. - CGATT already requires sufficient agreement.
67Which of the following is the best description of the financial statement analysis framework?
- AState the objective and context, gather data, process the data, analyze and
interpret the data, report the conclusions or recommendations, update the
analysis. - BGather data, analyze and interpret the data, determine the context, report the
conclusions, update the analysis. - CGather data, analyze and interpret the data, process the conclusions, assess the
context, report the recommendations, update the analysis.
- AState the objective and context, gather data, process the data, analyze and
68Required financial statements, according to International Accounting Standard (IAS) No. 1, include a(n):
- Abalance sheet and explanatory notes.
- Bcash flow statement and auditor's report.
- Cincome statement and working capital summary.
69The following amounts were drawn from the records of JME Company: total assets = $1,200; total liabilities = $750;
contributed capital = $600. Based on this information alone, retained earnings must be equal to:- A−$150.
- B$150.
- C$450.
70The standard auditor's report is most likely required to:
- Aprovide reasonable assurance that management is reliable.
- Bprovide an "unqualified" opinion if material uncertainties exist.
- Cprovide reasonable assurance that the financial statements contain no material errors.
71Which of the following statements about financial reporting standards is least accurate? Reporting standards:
- Anarrow the range within which management estimates can be seen as
reasonable. - Bare disclosed on Form 8K by publicly traded firms in the United States.
- Censure that the information is "useful to a wide range of users."
- Anarrow the range within which management estimates can be seen as
72Which of the following statements concerning the notes to the audited financial statements of a company is least accurate?
Financial statement notes:- Acontain information about contingent losses that may occur.
- Binclude management's assessment of the company's operating performance and
financial results. - Care audited.
73Desirable attributes of accounting standardsetting
bodies least likely include:- Amaking decisions that are in the public interest.
- Boperating independently of interested stakeholders.
- Chaving clear and consistent standardsetting
processes.
74Which of the following is least likely to be available on EDGAR (Electronic Data Gathering, Analysis, and Retrieval System)?
- ASEC filings.
- BCorporate press releases.
- CForm 10Q.
75The process of developing one universally accepted set of accounting standards is best described as:
- Aunification.
- Bconvergence.
- CIASB.
76Which of the following statements about the elements of financial statements under the FASB and IASB frameworks is least
accurate?- AThe IASB framework lists income and expenses as the elements related to
performance. - BThe IASB framework does not allow the values of assets to be adjusted upward.
- CThe word "probable" is used by the FASB to define assets and liabilities.
- AThe IASB framework lists income and expenses as the elements related to
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- upper (Accounting) CFA Test sobre Financial Statement Analysis- An Introduction , creado por harleen4 el 03/09/2015.
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