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financial statement analysis
Financial Statement Analysis Workbook A Practitioners Guide 4th Edition Martin S. Fridson, Fernando Alvarez - Solutions
48. Sometimes, management revenue recognition in order to short-run profits.____________ The motive for this paradoxical behavior is a desire to report the sort of that equity investors reward with ____________.
47. Analysts who strive to g____________o beyond routine can profit by seeking of corporate disclosure, even when have already placed ____________.
46. Generally, the initial response of corporate executives caught in a lie is ____________, but gratifyingly often,____________ .
45. A stock’s value is a function of expected____________ , which partly depend on the vis- ` a-vis____________ its competitors’.
44. If earnings look suspiciously during a____________ for the company’s industry, users of financial statements should explains the disparity.
43. Halliburton became more aggressive about ____________, a classic technique for____________ .
42. In 2001, Halliburton adopted an even more aggressive approach to____________ . For some projects, Halliburton began reporting sales .____________ Previously, the policy was to book revenues ____________. In addition,____________ the company began keeping some disputed bills on the books . The
41. ____________Users of financial statements should not be intimidated by corporate that denounce allegedly irresponsible____________.
40. It is impossible to assess the quality of an internal investigation without information on the____________ , and the basis____________ .
39. A second lesson of the Krispy Kreme case is ____________that and____________ often go hand in hand.
38. An exceptionally long record of or is a reason to____________ .
37. Krispy Kreme was fictitious earnings. Rather, the SEC complaint depicted a____________ , through a wide range of ____________, to beat____________ .
36. Krispy Kreme increased the size of the corrections to its fiscal 2004 results. The previously undisclosed problems involved____________ , ____________, and____________ .
35. Most,____________ if not all, of the on Krispy Kreme’s appeared to have come from a transaction, ____________rather than from____________ .
34. Had Krispy Kreme instead____________ , it would have ____________. The catch is that an asset is supposed to be ____________. Terminated stores would not seem .
33. In essence, according to the Wall Street Journal’s story, ____________Krispy Kreme by taking money____________ .
32. Krispy Kreme revised its senior executive compensation plan.1 ____________Henceforth, officers would receive unless the company in each quarter____________ .
31.____________ Inevitably, the underlying trend of final sales to consumers slows down, at least temporarily.____________ At that point, the manufacturer’s growth in reported revenue will maintain its trend only , ____________relative to their sales. If the distributors balk, , forcing a
30. Loading does not boost____________ , but merely shifts the timing of its ____________.
29. ____________Loading the distribution channels consists of to accept larger shipments of goods than ____________.
28. The SEC also claimed that management at____________ Sequoia Systems profited from the scheme by____________ .
27. The SEC claimed that management at Sequoia Systems inflated revenue and profits by:a.____________ b.____________ c.____________
26. As is generally the case with____________ , taking liberties with the percentage-of-completion borrows____________ , making a surprise at some point.
25. GAAP addresses the problem through the , which permits the company to recognize revenue in ____________, rather than in line with its billing.
24. Under certain circumstances, a company engaged in long-term contract work can ____________. This result arises from GAAP’s solution to____________ a mismatch commonly observed .
23. Under GAAP,____________ the general requirement was to spread membership fees . If a company offered refunds, it could not until the refund period expired, ____________unless there was to enable management to estimate with reasonable confidence.____________
22. There was no change in the accounting principle,____________ namely ____________. In the case of a health club, members’ upfront fees represent____________ . Club operators should therefore recognize the revenue over the period in which____________ .
21. As in any sales situation, aggressive pursuit of new business could result in .____________ On average, the newer members might prove to be ____________or less committed to physical fitness than____________.
20. On thewhole, Bally’s reported profit margins benefited from the increase in as a percentage of total revenues. The reported____________ earnings, however,____________ rested on assumptions regarding the percentage of customers who____________ .
19. Prior to the change in accounting practice, ____________which FAS 101 made mandatory, Wal-Mart booked layaway sales . ____________Under the new ____________and more conservative method, the company began to recognize the sales .
18. In layaway sales, customers reserve goods____________ , and then make additional payments over a specified period,____________ when they have paid in full.
17. Encouragingly for users of financial statements,____________ managers are often betrayed by____________ .
16. Take-Two shipped hundreds of thousands ____________of video games to distributors ____________, booked the shipments ____________, then in later periods.
15.____________ to the lesson taught by many other cases of financial misreporting, it paid to____________ accept the Take-Two assurances that the company’s business prospects .
14. According to Take-Two management____________, the adjustment arose because the company on some games it sold to “____________ ”but which were later by ____________Take-Two.
13. The Bristol-Myers Squibb case study nevertheless____________ illustrates the value of against____________ .
12.____________ Also suspect was Bristol-Myers’s repeated practice of that exactly equaled____________ .
11. Haydon was known for speaking candidly about Bristol-Myers’s____________ declining sales prospects. Consequently, ____________his reassignment was ____________.
10. Along with other pharmaceutical producers,____________ Bristol-Myers was feeling profit pressures due to to replace sales of products.
9. “____________ ” is a security analysts’ term for the financial reporting gimmick that Bristol-Myers employed ____________.
8. The explanation for the sudden drop in projected earnings____________ was that in 2001 Bristol-Myers to induce them to at a much faster rate than necessary to____________.
7. As a rule, distorting one section of the financial statements ____________. Assiduous tracking of a variety of should raise serious questions about a company’s reporting____________, at a minimum.
6. Staying alert to evidence of flawed,____________ , reporting is essential, even when the auditors .
5. Even when an independent accounting firm certifies that a company’s____________ financials with generally accepted accounting principles;____________ the analyst must stay alert for evidence ____________.
4. Bonus-seeking managers may initially veer off the straight-and-narrow by a small amount from____________ , intending to the following year, but they instead fall further and further behind. ____________Eventually, the gap between and grows too large to sustain.
3. ____________To seasoned investors, by a senior manager represents.
2. Under intense pressure to maintain their stock prices, companies characterized by seem particularly prone____________ .
1. Many corporations employ practices that comply with GAAP____________ yet ____________.
9. In many industries, ____________fixed assets consist mainly of ____________. The major risk of analytical error does not arise from the possibility that ____________, but the reverse.
8. In the____________ , companies typically record depreciation and____________ amortization expense that far exceeds physical wear-and-tear on assets.
7. The rate at which____________ the tax code allows owners to write off property overstates____________ .
6. The issuer of the statements can or____________ its reported earnings simply by using its latitude to assume shorter or longer____________ .
5. An essential element of genuinely useful financial statement analysis is:____________.
4. Merely____________ , it is clear, ____________does not increase wealth.
3. There can be no bona fide profit without____________ . Bona fide profits are the only kind of profits in financial analysis.
2. When calculating profits, the analyst must take care____________ to consider only genuine revenues and deduct all relevant costs.
1. Profitability is a yardstick by which businesspeople ____________can measure their and justify____________ .
40. In the hands of an aggressive but prudent management, ____________a cash flow cushion can enable ____________a company to when competitors are forced to cut back.
39. The cash flow statement is the best tool for measuring____________ , which,____________ contrary to a widely held view, is not merely a security blanket for .____________
38. The income statement is a dubious measure of the success of a company that is being managed to____________ rather than____________ , reported profits.
37. Another less obvious risk of ____________eschewing financial flexibility is the danger of permanently losing through____________ occasioned by recessions.
36. Keeping cash “trapped” in marketable securities can enable a firm over “lean-and-mean” competitors when____________ make it difficult to____________ .
35. Overinvestment has unquestionably led,____________ in many industries, to prolonged periods of____________ , producing in turn chronically ____________. In retrospect, ____________the firms involved would have served their shareholders better if they had or ____________, instead of ____________.
34. One typical consequence of violating or striving to head off is that management reduces discretionary expenditures to avoid____________ .
33. A company with a strong balance sheet can fund much of that cash need by increasing its (credit extended by vendors). ____________External financing may be needed, however,____________ if accumulation of unsold goods causes to rise disproportionately to ____________.Similarly, ____________if
32. A final factor in assessing financial flexibility is the change in adjusted working capital.____________ Unlike conventional working capital____________ , this figure excludes____________ , as well as____________ and ____________.
31. Reducing is a step that corporations try very hard to avoid,____________ for fear of and consequently suffering an increase in ____________.
30. If a corporation’s financial strain becomes acute, the board of directors may take the comparatively extreme step of____________ .
29. At times, becomes____________ , as a function or ____________. During the that____________ occasionally befall the business world, is unavailable at any price.
28. In difficult times, ____________when a company must cut back on various expenditures ____________, management faces many difficult choices. A key objective is to____________ .
27. By studying the cash flow statement, ____________an analyst can make informed judgments on such questions as:a.____________ b.____________ c.____________
26. ____________struggle to generate sufficient cash____________ as a consequence of meager earnings.
25. ____________are past the cash strain faced by growth companies that must fund large programs.
24. Some choose instead to internally.They either launch or acquire businesses with____________ . The older businesses become for funding the newer activities.
23. Far from depending ____________, this mature company ____________, giving them the opportunity to it in higher-growth, .
22. Reflecting the of its business, Kimberly-Clark generates a level of ____________.
21.____________ are in a less precarious state in terms of cash flow than their emerging growth counterparts.
20. Unlike a ____________, Green Mountain is____________ . It issues substantial each year to fund its____________ .
19. For a company at____________ , it may take several years for sales to reach sizable fixed costs that are ____________.
18. ____________are start-ups that survive long enough to reach the stage of entering the public market.
17.____________ are typically voracious cash users.
16. Sharply declining sales and earnings,____________ ultimately resulting in ____________, characterize industries in decline.
15. Price competition often intensifies at this stage, as companies ____________. The stage does not automatically follow maturity,____________ but over long periods some industries do get swept away by____________ .
14. During the period,____________ growth in sales and earnings decelerates as the____________ . In the phase, sales opportunities are limited to the replacement of products previously sold, plus .
13. Growth and profits accelerate rapidly during the phase, ____________as the company’s products begin to penetrate the market and the____________ .
12. Revenues build gradually during the phase____________, during which time the company is just____________ and____________ .
11. When a company is____________ , its balance sheet may its asset value____________, as a result of having lagged the of the company’s operations.
10. Among the applications and uses of the Statement of Cash Flows are:a.____________ b.____________ c.____________
9. The____________ , rather than the ____________, provides the best information about a highly leveraged firm’s financial health.
8. In an LBO, ____________the equity investors do not reap spectacular gains without incurring significant ____________. There is a danger that everything and that they will lose____________ . Specifically, there is a risk that____________ will fall short of expectations, perhaps as a result of
7. Analysts evaluating the investment merits of the LBO proposal would miss the point if they focused on ____________rather than____________.
6. Viewed in terms of cash inflows and outflows, rather than earnings, begins to look like____________ .
5. The amount attributable to depreciation____________ in the current year. Rather, it is a bookkeeping entry intended to represent the ____________, through use,____________ .
4. In a classic LBO,____________ a group of investors acquires a business by and the balance.
3. A privately held company, unlike a____________ , which shows one set of statements to the public and another to the Internal Revenue Service,____________ a private company typically prepares of statements, with foremost in its thinking.____________ Its incentive is not ,____________ but
2. For financial-reporting (as opposed to ) ____________purposes, a publicly owned company generally seeks to maximize____________ , which investors use as a basis for valuing its shares.
1. The present version of the statement that traces the flow of funds in and out of the firm, the statement of cash flows,____________ became mandatory, under____________ , for issuers with fiscal years ending after____________.
37. Financial statements cannot capture certain that may be essential to . These include____________ a.____________ b.____________ c.____________
36. Deals that work on paper have often foundered on a.____________ b.____________ c.____________ d____________.
35. A company with relatively large has a breakeven level. Even a modest economic ____________downturn will reduce below the rate____________ required to keep the company profitable.
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