Question 1

The evaluation of company performance and financial condition includes evaluation of (1)past and current performance, (2)current financial position,and (3)future performance and risk.

Accepted Answer

The evaluation of company performance and financial condition includes these three components: past and current performance, current financial position, and future performance and risk.

Question 2

Standards for comparison are not generally necessary when making judgments about a company's performance.

Accepted Answer

Standards for comparison are necessary to accurately assess a company's performance. Without a standard to measure against, it is difficult to make informed judgments. Standards can include past performance, industry benchmarks, and competitor performance.

Question 3

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Accepted Answer

False

Question 4

Liquidity and efficiency are the ability to meet short-term obligations and to efficiently generate revenue.

Accepted Answer

Liquidity refers to the ability to meet short-term obligations, while efficiency refers to the ability to efficiently generate revenue. Both are important aspects of financial management.

Question 5

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accepted Answer

This statement is true. Comparing measures with a competitor or a group of competitors can provide valuable insights into industry trends, best practices, and areas for improvement.

Question 6

Evaluation of company performance does not include analysis of (1)past and current performance, (2)current financial position,and (3)future performance and risk.

Accepted Answer

Evaluation of company performance does include analysis of past and current performance, current financial position, and future performance and risk.

Question 7

One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.

Accepted Answer

Financial statement analysis can provide important strategic insights for internal users such as management, allowing them to make informed decisions to improve the company's efficiency and effectiveness in delivering products and services.

Question 8

Profitability is the ability to generate future revenues and meet long-term obligations.

Accepted Answer

The answer of Profitability is the ability to generate future...

Question 9

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Accepted Answer

The answer of Market prospects are the ability to provide...

Question 10

Financial statement analysis may be used for personal financial investment decisions.

Accepted Answer

Financial statement analysis can provide valuable insights into the financial health and performance of companies, which can help individual investors make informed investment decisions. By analyzing financial statements such as balance sheets, income statements, and cash flow statements, investors can assess a company's profitability, liquidity, solvency, and overall financial stability. This information can then be used to determine whether or not to invest in the company's stock, bonds, or other securities.

Question 11

Profitability is the ability to generate positive market expectations.

Accepted Answer

The answer of Profitability is the ability to generate positive...

Question 12

Financial statement analysis is the application of analytical tools to general-purpose financial statements and related data for making business decisions.

Accepted Answer

This statement is true. Financial statement analysis involves using various analytical tools to analyze financial statements and related data to make informed business decisions.

Question 13

External users of accounting information make the strategic and operating decisions of a company.

Accepted Answer

The answer of External users of accounting information make the...

Question 14

Intra-company analysis is based on comparisons with competitors.

Accepted Answer

Intra-company analysis is based on comparisons with a company's own performance and targets, while inter-company analysis is based on comparisons with competitors.

Question 15

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

Accepted Answer

Comparing a company's financial performance to that of its competitors and industry peers provides valuable context and helps to identify strengths and weaknesses. This analysis can inform decision-making related to investments, pricing strategies, and operational improvements.

Question 16

Financial analysis only refers to the communication of relevant financial information to decision makers.

Accepted Answer

The answer of Financial analysis only refers to the communication...

Question 17

General-purpose financial statements include the (1)income statement, (2)balance sheet, (3)statement of stockholders' equity (or statement of retained earnings), (4)statement of cash flows,and (5)notes to these statements.

Accepted Answer

This is correct as all five statements are considered general-purpose financial statements that are included in financial reports.

Question 18

Financial statement analysis lessens the need for expert judgment.

Accepted Answer

Financial statement analysis involves interpreting financial statements to determine a company's financial position and performance. While it can provide valuable insights, it is not a replacement for expert judgment. Expert judgment is still needed to consider non-financial factors, assess risks, and make strategic decisions.

Question 19

Financial reporting includes not only general purpose financial statements,but also information from SEC filings,press releases,shareholders' meetings,forecasts,management letters,auditor's reports,and Webcasts.

Accepted Answer

Financial reporting includes all of the listed sources of information in addition to general purpose financial statements.

Question 20

The building blocks of financial statement analysis include (1)liquidity, (2)salability, (3)solvency,and (4)profitability.

Accepted Answer

The building blocks of financial statement analysis include liquidity, solvency, profitability, and financial efficiency. Salability is not typically included as a key building block.

Quiz 17: Analysis of Financial Statements