Multiple Choice Questions
1. Financial statement analysis:
A) Is the application of analytical tools to general-purpose financial statements and related data for making business decisions.
B) Involves transforming accounting data into useful information for decision-making.
C) Helps users to make better decisions.
D) Helps to reduce uncertainty in decision-making.
E) All of the above.
2. Evaluation of company performance can include comparison and/or assessment of:
A) Past performance.
B) Current performance.
C) Current financial position.
D) Future performance and risk.
E) All of the above.
3. The building blocks of financial statement analysis includes:
A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) All of the above.
4. Financial reporting refers to:
A) The application of analytical tools to general-purpose financial statements.
B) The communication of relevant financial information to decision makers.
C) Financial statements only.
D) Ratio analysis.
E) Profitability.
5. The ability to meet short-term obligations and to efficiently generate revenues is called:
A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.
6. The ability to provide financial rewards sufficient to attract and retain financing is called:
A) Liquidity and efficiency.
B) Solvency.
C) Profitability.
D) Market prospects.
E) Creditworthiness.
7. Intracompany standards for financial statement analysis:
A) Are often based on a company's prior performance.
B) Are often set by competitors.
C) Are set by the company's industry.
D) Are based on rules of thumb.
E) Are published in Dun and Bradstreet.
8. Industry standards for financial statement analysis:
A) Are based on a company's prior performance.
B) Are set by the government.
C) Are set by the financial performance and condition of the company's industry.
D) Are based on rules of thumb.
E) Compare a company's income with the prior year's income.
9. The comparison of a company's financial condition and performance across time is known as:
A) Horizontal analysis.
B) Vertical analysis.
C) Political analysis.
D) Financial reporting.
E) Investment analysis.
10. The comparison of a company's financial condition and performance to a base amount is known as:
A) Financial reporting.
B) Horizontal ratios.
C) Investment analysis.
D) Risk analysis.
E) Vertical analysis