Financial Statement Analysis- An Introduction

Which of the following is least likely to be considered a role of financial statement analysis?

A 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

The Management Discussion and Analysis (MD&A) portion of the financial statements:

In the expanded form of the accounting equation, assets equal liabilities plus contributed capital plus:

According to the IASB, which of the following least accurately describes financial reporting? Financial reporting:

Alpha 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

What is the fundamental balance sheet equation?

Prema 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:

Beta 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

An accounting entry that updates the historical cost of an asset to current market levels is best described as:

Which of the following financial reporting choices is permitted under IFRS but not under U.S. GAAP?

Accruals are best described as requiring an accounting entry:

Which of the following statements represents information at a specific point in time?

Which of the following statements about proxy statements is least accurate? Proxy statements are:

When 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:

Which of the following is an analyst least likely to rely on as objective information to include in a company analysis?

Wichita 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 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:

Reading the footnotes to a company's financial statements and the Management Discussion & Analysis is least likely to help an analyst determine:

Which of the following financial reporting choices is permitted under IFRS but not under U.S. GAAP?

Information about a company's financial position at a point in time is most likely found in the:

Allowance 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

Characteristics of a coherent financial reporting framework are best described as:

Which of the following would NOT require an explanatory paragraph added to the auditors' report?

Accumulated depreciation and treasury stock are most likely to be shown as what types of accounts? Accumulated Treasury stock depreciation

Professional organizations of accountants and auditors that establish financial reporting standards are called:

Management disclosure of the likely impact of implementing recently issued accounting standards is least likely to:

The Management Discussion and Analysis (MD&A) portion of the financial disclosure is least likely required to discuss:

Which of the following statements about financial statement analysis and reporting is least accurate?

According to the IASB conceptual framework, characteristics that enhance relevance and faithful representation include:

In 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:

Jack 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:

Which of the following statements about financial statements and reporting standards is least accurate?

Which of the following is the least likely to be considered an accrual for accounting purposes?

Washburn 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

Making a profitable sale on credit is most likely to have which of the following effects?

Which of the following is an independent auditor least likely to do with respect to a company's financial statements?

A listing of all the firm's journal entries by date is called the:

In 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?

Which of the following is a company least likely required to present according to International Accounting Standard (IAS) No. 1?

An analyst is least likely to use disclosures of accounting policies and estimates to evaluate:

According to the IASB Conceptual Framework for Financial Reporting, one of the qualitative characteristics of financial statements is:

The best description of the general ledger is that it:

A company's chart of accounts is:

The term "convergence" is most accurately used to describe:

Which 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?

Which of the following is the best description of the flow of information in an accounting system?

A 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

Disagreements that inhibit development of a coherent financial reporting framework are least likely to involve which of the following?

Which of the following statements regarding footnotes to the financial statements is least accurate?

Which of the following is least likely to be considered a characteristic of a coherent financial reporting framework?

The step in the financial statement analysis framework that includes making any appropriate adjustments to the financial statements and calculating ratios is best described as:

A company's operating revenues for a reporting period are most likely to be shown on its:

Two underlying assumptions of financial statements, according to the IASB conceptual framework, are:

Which of the following best describes financial reporting and financial statement analysis?

The purchase of equipment for $25,000 cash is most likely to be recorded as:

An analyst can find a company's accounting policies that require significant judgement or estimates in:

Which of the following least accurately describes a correct use of doubleentry accounting?

Under which framework for financial reporting systems are the financial statement elements related to performance defined as revenues, expenses, gains, losses, and comprehensive income?

The step in the financial statement analysis framework of "processing the data" is least likely to include which activity?

Which description of the objective of financial statements is most accurate? The objective of financial statements is:

Sergey 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?

According to the IFRS framework, timeliness is a characteristic that enhances:

Which of the following is least likely to be considered a stated goal of the International Accounting Standards Board (IASB)?

Regarding the use of financial statements in security analysis and selection, it would be most accurate to say that:

Which of the following is most likely to be considered a barrier to developing one universally recognized set of reporting standards?

Which of the following is the best description of the financial statement analysis framework?

Required financial statements, according to International Accounting Standard (IAS) No. 1, include a(n):

The 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:

The standard auditor's report is most likely required to:

Which of the following statements about financial reporting standards is least accurate? Reporting standards:

Which of the following statements concerning the notes to the audited financial statements of a company is least accurate? Financial statement notes:

Desirable attributes of accounting standardsetting bodies least likely include:

Which of the following is least likely to be available on EDGAR (Electronic Data Gathering, Analysis, and Retrieval System)?

The process of developing one universally accepted set of accounting standards is best described as:

Which of the following statements about the elements of financial statements under the FASB and IASB frameworks is least accurate?