Financial management

When an income statement is subjected to vertical analysis, the base (representing the 100% figure) is generally:

• net income after taxes

• gross profit

• net sales

• net income before taxes

The tools and techniques used to analyze financial statements are divided into broad categories including all of the following except

• ratio analysis

• vertical analysis

• horizontal analysis

• profitability analysis

Horizontal analysis involves the study of:

• the changes in individual financial statement amounts as a percentage of some related total.

• the peso amount of the change in various financial statement amounts from year to year.

• the change in key financial statement ratios over a certain time frame or horizon.

• percentage changes in the balances shown in comparative financial statements.

Of the items listed below, the one that would be most helpful comparison of different sized companies is:

• comparison of their working capital balances

• preparation of common-size financial statements

• horizontal analysis

• to look at the amount of income earned by each company

Which type of ratio measures the earning power of a firm?

• Liquidity

• Asset management

• Debt management

• Profitability

Which of the following represents the correct order of the risk management process?

Which of the following is a key element of risk management?

• Risk management metrics, resource allocation, risk assessment, effective communication, post-mortem analysis.

• Risk management metrics, resource allocation, risk assessment, effective communication, post-mortem analysis.

• Risk assessment, resource allocation, risk governance and reporting, post-mortem analysis, feedback.

• Resource allocation, risk monitoring, risk assessment, feedback, post-mortem analysis.

Which is the least effective form of risk management?

• Systems-based preventive control.

• People-based preventive control.

• Systems-based detective control.

• People-based detective control.

Which of the following factors affects the control risk of a company?

• Potential problems like technological obsolescence.

• Unusual pressures on management.

• Complex accounts that require expert valuations.

• Segregation of duties.

In developing an appropriate work program for an audit engagement, the most important factor for an audit supervisor to consider is the:

• Availability of records and data.

• Potential impact of risks.

• Capabilities of audit personnel.

• Time required to complete the engagement.