financial stmt analysis ch 5
which of the following does NOT represent a problem with financial analysis
Financial analysis can be used to detect apparent liquidity problems.
Management is a user of financial analysis. Which of the following comments does not represent a fair statement as to the management perspective?
Management is always interested in maximum profitability.
suppose you are comparing two firms in the steel industry. one firm is large and the other is small. which type of numbers would be most meaningful for statement analysis
Relative numbers would be most meaningful for both the large and small firm, especially for interfirm comparisons.
which of the following is a government document that provides industry statistics
The Department of Commerce Financial Report
which of theses statements is false
a company comparison should not be made with industry averages of the company does not clearly fit into any one industry
which of the following would not be a user of financial statements
all of the above users
which of the following can offer a type of comparison in financifal statement analysis?
all of the answers are correct
statements in which all items are expressed only in relative terms (percentages of a base) are termed
common size statements
A given ratio is always computed the same way, no matter what the source.
false
Absolute figures usually have more meaning than ratio comparisons.
false
Dissimilar year ends will have no impact on the results of ratios.
false
in vertical common-size analysis, the dollar figure for an account is expressed in terms of that same account figure for a selected base year
false
liquidity ratios measure the degree of protection from long term suppliers of funds
false
the descriptive information in annual reports is not useful in statement analysis; only the financial statements themselves are of value
false
the principal asset of a merchandising firm will usually be accounts receivable
false
there is a standard list of ratios
false
in financial statement analysis, ratios are:
fractions usually expressed in percent or times
Denver Dynamics has net income of $2,000,000. Oakland Enterprises has net income of $2,500,000. Which of the following best compares the profitability of Denver and Oakland?
further information is needed for a reasonable comparison
which of the following is a false statement as it relates to analysis?
if merchandise with a 20% markup is sold on credit it would take ten successful sales of the same amount to make up for one sale not collected
which of the following statements is incorrect
in most sectors, NAICS provides for compatibility at the industry (six digit) level
which of these statements is false
in vertical analysis, a figure from the years statement is compared with a base selected from the prior statement
liquidity ratios can be used
measure a firm's ability to meet its current obligations
A retailing firm has which type of inventory?
merchandise
which of the following is not a source of industry statistics
mergent dividend record
a manufacturing firm will most likely have the heaviest investment in which type of assets?
plant property and equipment
annual statement studies reported the following figures for manufacturers of screw machine products for the ratio of current assets to current debt. the following figures are for a particular industry current ratio....
the median was 1.3, 1.6 is the figure for the upper quartile; 1.2 is for the lower quartile
various techniques are used in the analysis of financial data to emphasize the comparative and relative importance of the data presented and to evaluate the position of the firm. which of the following is not one of the techniques used in analysis
theory consistency
A service firm will usually have a low amount of inventory, consisting primarily of supplies.
true
Absolute figures and ratios are close to being meaningless unless compared to another figure.
true
Based on the terms of the credit and the purpose, the objectives of financial statement analysis by creditors will vary.
true
Different accounting methods can cause some ratios to differ substantially.
true
For NAICS, each country can add additional detailed industries, provided the additional detail aggregates to the NAICS level.
true
The ideal way to compare income statement figures, such as sales, to balance sheet figures, such as receivables, is to use a measure of the average for the balance sheet figures.
true
common size analysis involves expressing comparisons in percentages
true
financial statement analysis is a judgmental process
true
in order to determine the meaning of a ratio, some kind of comparison, such as an industry average or trend analysis, is helpful
true
typically, the largest expense to a manufacturing firm is cost of goods sold
true
when performing year-to year change analysis, a meaningful percent change cannot be computed when one number is positive and the other number is negative
true