Financial Statement Analysis

A company’s income statement shows an increase in revenue by 20%, while expenses have risen by 35%. Which conclusion can be drawn?

• Profitability has improved.

• Profitability has declined.

• Efficiency has increased

• No conclusion can be made

Company X and Company Y both have a P/E ratio of 25. If Company X has an expected growth rate of 25% and Company Y has 10%, which company is more attractive based on PEG?

• Company X, because its PEG is 1.0

• Company Y, because its PEG is 2.5

• Both are equally attractive

• Cannot be judged without dividend data

A company reports “Other Income” as a major contributor to net profit. Which interpretation is most accurate?

• Core operations are strong

• Profitability depends heavily on non-operating sources

• Company has no debt

• Company is undervalued

If operating profit margin improves while net profit margin declines, which of the following is the MOST likely reason?

• Increase in tax or interest expenses

• Decrease in cost of goods sold

• Increase in sales revenue

• Decrease in operating expenses

Which ratio directly indicates a company’s short-term liquidity position from the balance sheet?

• Return on Assets

• Current Ratio

• Net Profit Margin

• Earnings Per Share

Which item would NOT be found in an income statement?

• Depreciation expense

• Interest expense

• Trade receivables

• Operating profit

Which balance sheet trend is a potential red flag for shareholders?

• Constant increase in reserves and surplus
  

• Rising debt-to-equity ratio over multiple years
  

• Growth in share capital due to bonus issue
  

• Increase in fixed assets from reinvestment