Question 1

Understanding financial accounting helps to minimize the risk of investing in the stock market.

Accepted Answer

Financial accounting provides investors with accurate and reliable financial information about a company, which can help them make informed decisions about investing in the stock market. By understanding financial statements, investors can analyze a company's financial health, profitability, liquidity, and other key factors that affect the value of its stock. This enables them to minimize the risk of investing in companies with weak financial performance or unstable market conditions.

Question 2

Owning bonds as well as stocks is riskier than a large investment in a single company.

Accepted Answer

Owning a diversified portfolio of both stocks and bonds helps to reduce overall investment risk compared to a large investment in a single company. This is because stocks and bonds can have different levels of volatility and are affected by different market forces, so holding a mix of both can help to smooth out the ups and downs of the overall portfolio.

Question 3

The following information has been adapted from the 2004 and 2005 annual reports of Amazon.com's worldwide operations, available online at
http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsAnnual

-Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final,correct copy of the problem.Each team should turn in only one copy of the problem for grading.All team members will receive the same grade.
Use the adapted financial statements from Amazon.com,Inc.to answer the following questions:
  13.Use the liquidity ratios you have just calculated to discuss Amazon.com's liquidity.

Accepted Answer

The answer of The following information has been adapted from...

Question 4

Indicate which of the following analytical tools should be used in each situation:
a.current ratio
b.inventory turnover ratio
c.accounts receivable turnover ratio

Accepted Answer

The answer of Indicate which of the following analytical tools...

Question 5

Indicate which of the following ratios should be used in each situation.Some ratios may be used more than once.Others may not be used at all.
a.solvency
b.profitability
c.market indicator
d.liquidity

Accepted Answer

The answer of Indicate which of the following ratios should...

Question 6

The following information has been adapted from the 2004 and 2005 annual reports of Halliburton Company's worldwide operations, available online at
http://ir.halliburton.com/phoenix.zhtml?c=67605&p=irol-irhome
HALLIBURTON COMPANY	
Consolidated Statements of Operations

HALLIBURTON COMPANY	
Condensed Consolidated Statements of Cash Flows

HALLIBURTON COMPANY	
Consolidated Balance Sheets

-Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final,correct copy of the problem.Each team should turn in only one copy of the problem for grading.All team members will receive the same grade.
Use the adapted financial statements from Halliburton Company to answer the following questions:
  10.Use the liquidity ratios you have just calculated to discuss Halliburton Company's liquidity.
  14.Use the solvency ratio you have just calculated to discuss Halliburton Company's solvency.

Accepted Answer

The answer of The following information has been adapted from...

Question 7

One way to diversify is to ________.
A)invest only in stocks
B)invest only in bonds
C)invest in both stocks and bonds,but always from companies in the same industry,so that you become an industry expert
D)invest in both stocks and bonds from companies in different industries

Accepted Answer

Investing in both stocks and bonds from companies in different industries helps to spread out the risk and reduce the impact of any one industry's performance on your overall investment portfolio. By diversifying, you'll have a mix of asset classes that can help protect you during market downturns and capture gains during positive market trends.

Question 8

Owning only stocks is riskier than owning both stocks and bonds.

Accepted Answer

Owning only stocks exposes an investor to the full volatility of the stock market, and if the market experiences a downturn, the investor could suffer significant losses. Owning both stocks and bonds can provide diversification and help mitigate risk, as bonds generally have lower volatility and can serve as a hedge against stock market fluctuations.

Question 9

Indicate which of the following analytical tools is described in each situation below.Each ratio is used only once.
a.debt-to-equity ratio
b.return on assets ratio
c.return on equity ratio
d.gross profit ratio

Accepted Answer

The answer of Indicate which of the following analytical tools...

Question 10

Indicate which of the following ratios are being used in each situation.Some ratios may be used more than once.Others may not be used at all.
a.solvency
b.profitability
c.market indicator
d.liquidity

Accepted Answer

The answer of Indicate which of the following ratios are...

Question 11

The following information has been adapted from the 2005 and 2006 annual reports of Microsoft Corporation's worldwide operations, available online at http://www.microsoft.com/msft/reports/default.mspx:

Additional information that might be useful:

In 2005, Microsoft declared and paid a one-time cash dividend of $3.00 per share. At the same time, Microsoft announced plans to repurchase a large amount of its own stock.

-Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final,correct copy of the problem.Each team should turn in only one copy of the problem for grading.All team members will receive the same grade.
Required:
Use the adapted financial statements from Microsoft Corporation to answer the following questions:
  13.Use the liquidity ratios you have just calculated to discuss Microsoft's liquidity.

Accepted Answer

The answer of The following information has been adapted from...

Question 12

Investors diversify in order to ________.
A)earn the highest possible return from each investment in their portfolios
B)offset losses from one investment with gains from another investment
C)take maximum advantage of increases in earnings per share
D)buy low and sell high

Accepted Answer

Investors diversify in order to offset losses from one investment with gains from another investment. Diversification helps spread risk across different assets, reducing the impact of any one asset's performance on the investor's overall portfolio. This can help protect against significant losses and potentially improve overall returns.

Question 13

One way to diversify is to ________.
A)invest in both the stocks and bonds of a particular company
B)invest in both stocks and bonds from companies in different industries
C)learn both financial accounting and financial statement analysis
D)invest unlimited amounts of money

Accepted Answer

Investing in both stocks and bonds from companies in different industries is a good way to diversify because it spreads the risk across different sectors. Investing in both stocks and bonds of a particular company (A) is not diversifying at all and puts all the risk in one company. Learning financial accounting and financial statement analysis (C) may be helpful in making investment decisions, but it does not necessarily diversify a portfolio. Investing unlimited amounts of money (D) is not a strategy for diversification but rather a matter of personal financial means.

Question 14

Investors diversify in order to ________.
A)guarantee that they will earn a profit on their investments in stocks
B)minimize the risks of stock ownership
C)develop an appreciation of other cultures
D)earn a lower rate of return for a given amount of risk

Accepted Answer

By diversifying their investments, investors spread their money across different types of assets and industries, reducing the overall risk of their portfolio. This way, if one investment performs poorly, they will not lose all their money as they have other investments that may offset the losses.

Question 15

Indicate which of the following analytical tools should be used in each situation.Each ratio is used only once.
a.price/earnings ratio
b.dividend yield ratio
c.return on assets ratio
d.return on equity ratio
e.gross profit ratio

Accepted Answer

The answer of Indicate which of the following analytical tools...

Question 16

Investors can minimize risk by owning a diversified portfolio.

Accepted Answer

Owning a diversified portfolio helps to reduce risk by spreading out investments across different asset classes, industries, and geographical regions. This can minimize the impact of any single investment's performance on the overall portfolio.

Question 17

Owning many different stocks is riskier than a large investment in a single company.

Accepted Answer

Owning many different stocks helps diversify the portfolio, spreading out the risk among different companies and industries. A large investment in a single company could be affected by company-specific risks, such as a product recall or leadership changes.

Question 18

________ will help give an investor some protection against losses.
A)Learning financial accounting and financial statement analysis
B)Being a close friend of a company's CEO
C)Buying the most popular stocks
D)Buying a company's IPO (Initial Public Offering)

Accepted Answer

Learning financial accounting and financial statement analysis will help an investor to understand a company's financial health and make informed investment decisions. This can help give them some protection against potential losses. Being a close friend of a company's CEO or buying the most popular stocks does not necessarily provide any protection against losses. Buying a company's IPO may be a good investment opportunity, but it does not guarantee protection against losses.

Question 19

Comprehensive income is the total of all items that affect shareholders' equity except transactions with the owners.

Accepted Answer

The answer of Comprehensive income is the total of all...

Question 20

Comprehensive income is ________.
A)income earned by a company over an entire fiscal year
B)included in the calculation of net income
C)not included in the calculation of net income
D)income earned by a company including all of its business segments

Accepted Answer

The answer of Comprehensive income is ________.
A)income earned by a...

Quiz 10: Using Financial Statement Analysis to Evaluate Firm Performance

Understanding financial accounting helps to minimize the risk of investing in the stock market.

Owning bonds as well as stocks is riskier than a large investment in a single company.

Indicate which of the following analytical tools should be used in each situation: a.current ratio b.inventory turnover ratio c.accounts receivable turnover ratio

Indicate which of the following ratios should be used in each situation.Some ratios may be used more than once.Others may not be used at all. a.solvency b.profitability c.market indicator d.liquidity

One way to diversify is to ________.

Owning only stocks is riskier than owning both stocks and bonds.

Indicate which of the following analytical tools is described in each situation below.Each ratio is used only once. a.debt-to-equity ratio b.return on assets ratio c.return on equity ratio d.gross profit ratio

Indicate which of the following ratios are being used in each situation.Some ratios may be used more than once.Others may not be used at all. a.solvency b.profitability c.market indicator d.liquidity

Investors diversify in order to ________.

One way to diversify is to ________.

Investors diversify in order to ________.

Indicate which of the following analytical tools should be used in each situation.Each ratio is used only once. a.price/earnings ratio b.dividend yield ratio c.return on assets ratio d.return on equity ratio e.gross profit ratio

Investors can minimize risk by owning a diversified portfolio.

Owning many different stocks is riskier than a large investment in a single company.

________ will help give an investor some protection against losses.

Comprehensive income is the total of all items that affect shareholders' equity except transactions with the owners.

Comprehensive income is ________.