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Exam 12: Financial Statement Analysis

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Question 21

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The auditor's report guarantees the accuracy of the information presented in the financial statements.

A) True
B) False

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Question 22

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Historic financial results

A) help a lender determine the company's ability to service debt.
B) predict future cash flows with accuracy.
C) are not really needed for a financial analysis.
D) replace the need for financial projections.

E) All of the above
F) A) and B)

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Question 23

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Piroutte Inc. has come to the bank you work for looking for a $250,000 long-term loan. The loan committee has asked you to review the following data submitted with Piroutte's loan application: Instructions a) Calculate the solvency ratios: debt/equity, interest coverage, and cash flows to total liabilities for all three years. b) Write a brief report giving your recommendation on granting the loan. Provide support for your position.

Abbreviated versions of the financial statements for George Industries are presented below: Instructions Calculate the following: a) Net profit margin ratio b) Return on assets c) Return on equity

Which of the following is not a general category of ratios?

Limitations in ratio analysis include all of the following except for

Financial measures or ratios that are not prepared using information taken directly from these financial statements are referred to as or GAAP financial measures.

How are prepaid expenses used in each of the following ratios?

The financial statements of Remco Distributors Inc. appear below: Additional information for 2020: 1. Cash dividends of $45,000 were declared and paid. 2. Average number of common shares was 60,000 shares. 3. Market value of common shares on December 31 was $20 per share. Instructions Using the financial statements and the additional information, calculate the following ratios for 2020: a) Current ratio b) Return on equity c) Price/earnings ratio d) Accounts Receivables turnover e) Profit margin

Changes in the profit margin ratio could indicate changes in any of the following except changes in

Non-IFRS financial measures can only be taken from unaudited financial information.

The quick ratio will be negatively impacted by

A banker assessing a loan application and an equity analyst making an investment decision would perform the same type of analysis of a company.

Accounting policy choices will affect the financial statement but do not impact the ratios determined.

A company is required to disclose information related to the segment(s) in a note to the financial statements if it has only one distinctive operating segment.

When preparing common-size analysis of a statement of income, the base is normally

Two companies have an identical amount of current assets and current liabilities. Donald Inc. has 40% of its current assets invested in inventory, whereas Mickey Corp. has 30% of its current assets invested in inventory. Which of the following statements is true?

Fully diluted earnings per share is a worst case scenario.

The current ratio is an activity ratio.

When calculating the EPS, the cumulative preferred dividends must be removed even if the dividends have not been declared and paid.