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International Financial Statement Analysis

This document contains 23 multiple choice questions about international financial statement analysis. The questions cover topics such as earnings quality, accrual vs cash-based accounting, measures of aggregate accruals, balance sheet ratios, warning signs in financial statements, and off-balance sheet financing related to operating leases. The correct answer is provided for each multiple choice question.

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anita syaputri
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465 views

International Financial Statement Analysis

This document contains 23 multiple choice questions about international financial statement analysis. The questions cover topics such as earnings quality, accrual vs cash-based accounting, measures of aggregate accruals, balance sheet ratios, warning signs in financial statements, and off-balance sheet financing related to operating leases. The correct answer is provided for each multiple choice question.

Uploaded by

anita syaputri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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International Financial Statement Analysis

2. High earnings quality is most likely to


A. Result in steady earnings growth.
B. Improve the ability to predict future earnings.
C. Be based on conservative accounting choices.

3. The bestjustifi cation for using accrual - based accounting is that it


A . R e fl ects the company ’ s underlying cash fl ows.
B . R e fl ects the economic nature of a company ’ s transactions.
C. Limits management ’ s discretion in reporting fi nancial results.

4. The best justifi cation for using cash - based accounting is that it
A. Is more conservative.
B. Limits management ’ s discretion in reporting fi nancial results.
C. Matches the timing of revenue recognition with that of associated expenses.

5. Which of the following is not a measure of aggregate accruals?


A. The change in net operating assets.
B. The difference between operating income and net operating assets.
C. The difference between net income and operating and investing cash fl ows.

6. Consider the following balance sheet information for Profi le, Inc.:
Year ended 31 December 2007 2006
Cash and short - term investments 14,000 13,200
Total current assets 21,000 20,500
Total assets 97,250 88,000
Current liabilities 31,000 29,000
Total debt 50,000 45,000
Total liabilities 87,000 79,000
Profi le ’ s balance - sheet - based accruals ratio in 2007 was closest to
A. 12.5%.
B. 13.0%.
C. 16.2%.

7. Rodrigue SA reported the following fi nancial statement data for the year ended
2007:
Average net operating assets 39,000
Net income 14,000
Cash fl ow from operating activity 17,300
Cash fl ow from investing activity (12,400)
Rodrigue ’ s cash - fl ow - based accruals ratio in 2007 was closestto
A. – 8.5%.
B. – 19.1%.
C. 23.3%.

16. A sudden rise in inventory balances is least likely to be a warning sign of


A. Understated expenses.
B. Accelerated revenue recognition.
C. Ineffi cient working capital management.

17. A warning sign that a company may be deferring expenses is sales revenue growing
at aslower rate than
A. Unearned revenue.
B. Noncurrent liabilities.
C. Property, plant, and equipment.
18. An asset write - down is least likely to indicate understatement of expenses in
A. Prior years.
B. Future years.
C. The current year.

19. Ranieri Corp. reported the following 2007 income statement:


Sales 93,000
Cost of sales 24,500
SG & A 32,400
Interest expense 800
Other income 1,400
Income taxes 14,680
Net income 22,020
Ranieri ’ s core operating margin in 2007 was closest to
A. 23.7%.
B. 38.8%.
C. 73.7%.

20. Sebastiani AG reported the following fi nancial results for the years ended 31 December:
2007 2006
Sales 46,574 42,340
Cost of sales 14,000 13,000
SGA 13,720 12,200
Operating income 18,854 17,140
Income taxes 6,410 5,656
Net income 12,444 11,484
Compared to core operating margin in 2006, Sebastiani ’ s core operating margin in
2007 was
A. Lower.
B. Higher.
C. Unchanged

21. A warning sign that ordinary expenses are being classifi ed as nonrecurring or
nonoperatingexpenses is

A. Falling core operating margin followed by a spike in positive special items.


B. A spike in negative special items followed by falling core operating margin.
C. Falling core operating margin followed by a spike in negative special items.

22. Which of the following obligations must be reported on a company ’ s balance sheet?
A. Capital leases.
B. Operating leases.
C. Purchase commitments.
23. The most accurate estimate for off - balance - sheet fi nancing related to operating
leases consists of the sum of
A. future payments.
B. future payments less a discount to refl ect the related interest component.
C. future payments plus a premium to refl ect the related interest component.

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