Chapter 5: Financial Statement Analysis

Which of the following is not included in the Financial Analysis Limitation?

• Market Dynamics

• Diversity in GAAP

• Prior Capital Charged

• Inter-industry Ratio Differences

What are the three Primary Liquidity Ratios?

• Inventory Turnover, Days to sell Inventory, Payable Turnover

• Inventory-Conversion Cycle, Receivable Conversion Cycle, Operating Cycle

• Collection Period, Payment Period, Billing Period

• Current Ratio, Quick Asset Ratio, Defensive-Interval Ratio

It measures the ability of the business to generate profit concerning sales, investments, assets, equities, or ordinary shares outstanding.

• Growth Ratio

• Liquidity Ratio

• Profitability Ratio

• Leverage Ratio

The following are the 3 basic drawbacks in Return on Equity, except:

• There is always a conflict in the investment definition between the corporate headquarters and the investment manager.

• ROA is expressed in terms of percentage based on amount and does not consider some relevant quantitative data such as the life of assets and differences in the amount of investments between and among investments.

• It measures the performance of investment managers based on accrual income, not in terms of cash.

• None of the above.

Equity multiplier (EM) is also called?

• Shareholder Equity

• Average Ratio

• Financial Leverage Multiplier

• Asset Multiplier

They are individuals prioritizing safety and security.

• Risk-averse

• Risk-taker

• Conservative

• Aggressive

It is an approach in which businesses raise capital by selling shares of stock to different investors in exchange for funds.

• Risk-aversion

• Risk-taking

• Conservative

• Aggressive

What is the main objective of trend analysis in financial statement analysis?

• To compare financial data over a two-year period.

• To uncover patterns and make informed predictions based on past data.

• To simplify the complexity of financial reports.

• To understand the proportion of each component in relation to a chosen base.

What does vertical analysis do for financial statements?

• Compares data between different companies.

• Compares financial data over a two-year period.

• Expresses financial data in percentages in relation to a chosen base.

• Looks at differences between two periods.

Investors are more interested in cash returns that in accrual "paper" income.

• Growth Ratio

• Dividend Payout Ratio

• Book Value Per Share

• Dividend Yield Ratio