Exam Prep 2 For Accounting 230

Front 1

Which of the following would be helpful to an analyst evalutaing the performance of a firm?

Back 1

Understanding the economic and political enviroment in which the company operates, reviewing the annual reports ofa company's suppliers, customers and competitors, preparig common-size financial statements and calculating key financial ratios for the company being evaluated.
All of the above

Front 2

Which of the following is not required to be discussed in the MD&A of the Financial Condition and Results of Operations

Back 2

Earnings projections

Front 3

What type of information found in supplementary schedules is required for inclusion in an annual report

Back 3

Segmental data

Front 4

What is Form 10-K

Back 4

A document filed with the SEC by companies selling securities to the publicm containing much of the same information as the annual report as well as additional detail

Front 5

What info can be gained from sources such as Industry Norms and Key Business Ratios, Annual Statement Studies, Analyst's Handbook and Industry Surveys

Back 5

A company's relative position within it's industry

Front 6

Which of the following is not a tool or technique used by a financial statement analyst

Back 6

Random Sampling analysis

Front 7

What do liquiduty ratios measure

Back 7

A firm's ability to meet cash needs as they arise

Front 8

Which category of ratios is useful in assessing the capital structure and long-term solvency of a firm?

Back 8

Leverage ratios

Front 9

What is a serious limitation of financial ratios?

Back 9

Ratios are not predictive

Front 10

What is the most widely used liquidity ratio

Back 10

Current ratio

Front 11

What is a limitation common to both the current and the quick ratio?

Back 11

Accounts receivable may not be truly liquid

Front 12

Why is the quick ratio a more rigorous test of short0run solvency than the current ratio

Back 12

The quick ratio considers only cash and marketable securites as current assets

Front 13

What does an increasing collection period for accounts receivable suggest about a firm's credit policy?

Back 13

The credit policy may be too lenient

Front 14

Which of the following statements about inventroy turnover is false

Back 14

A low inventory turnoer is generally a sign of efficient inventory management

Front 15

Which would cause the cash conversion cycle to decrease

Back 15

Increasing days payable outstanding

Front 16

What do the asset turnover ratios measure

Back 16

Management's effectiveness in generating sales from investments in assets

Front 17

Which of the following ratios would not be used to measure the extent of a firm's debt financing

Back 17

Times interest earned

Front 18

Why is the amoung of debt in a company's capital structure important to the financial analyst

Back 18

Debt implies risk

Front 19

Why is the fixed charge coverage ratio a broader measure of a frim's coverage capabilities than the times interest earned ratio

Back 19

The fixed charge ratio includes lease payments as well as interest payments

Front 20

Which profit margin measures the overall operating efficiency of the firm

Back 20

Operating profit margin

Front 21

Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating return to shareholders

Back 21

Return on investment and return on equity

Front 22

What does a financial everage index greater than one indicate about a firm

Back 22

Operating returns more than sufficient to cover interest paymetns on borrowed funds

Front 23

What does the price to earnings ratio measure

Back 23

The "multiple" that the stock market places on a firm's earnings

Front 24

Effective Tax Rate

Back 24

Decrease
Used to determine "effective" tax rates for companies based on income statement data

Front 25

Current Ratio

Back 25

CA/CL- Increase
Measures short-term liquidity, the ability of a firm to meet needs for cash as they rise

Front 26

Cash-flow liquidity Ratio

Back 26

Measures short term liquidity by considering as cash resources

Front 27

Average collection period

Back 27

Decrease Indicates days required to convert receivables into cash

Front 28

Days inventory held

Back 28

Decrease
Indicates days required to sell inventory

Front 29

Days payable outstanding

Back 29

Increase
Indicates days required to pay suppliers/vendors

Front 30

Cash conversion Cycle

Back 30

Decrease
Indicates how many times receivables are collected during a year, on average

Front 31

Accounts Receivable Turnover

Back 31

Increase
Indicates how many times receivables are collected during a year, on average

Front 32

Inventory Turnover

Back 32

Increase
Measures efficiency of the firm in management and selling of inventory

Front 33

A/P Turnover

Back 33

Decrease
Measures the efficiency of the firm paying it's suppliers

Front 34

Fixed Asset Turnover

Back 34

Depends
Measures efficiency of the firm in managing fixed assets

Front 35

Total Asset Turnover

Back 35

Measures efficiency of the firm in managing all assets

Front 36

Return on assets

Back 36

Increase
Measures overall efficiency of firm in managing asset and generating net profits/net income/net earnings. Reflects firm's ability to generate Net income/net profit from its total resources (assets)

Front 37

Debt Ratio

Back 37

Depends
Shows proportion of all assets that are financed with debt

Front 38

Long term debt

Back 38

Depends
Measures the extent to which long-term debt is used for permanent financing

Front 39

Debt to equity

Back 39

Depends
Measures the capital structure of the company, how much total debt they have relative to equity

Front 40

Financial Leverage

Back 40

depends
Indicates if a firm is employing debt successfully

Front 41

Times interest earned

Back 41

Increase
Measures how many times interest expense is covered by operating earnigns/operating profit

Front 42

Cash interest earned

Back 42

Increase
Measure how many times interest payments are covered by cash flow from operating activites

Front 43

Fixed Charge coverage

Back 43

Increase
Measures coverage capability more broadly than times interest earned by including operating lease payment as a fixed expense

Front 44

Cash flow adequacy

Back 44

Increase
Measures how many times capital expenditures, debt repayments, and cash dividends are covered by operating cash flow

Front 45

Operating Leverage

Back 45

The sue of fixed costs to increase net income as sales/revenue increase