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Test Bank For Financial Statement Analysis A Data Analytics Approach 2024 Release By Rober, Exams of Finance

Global University Finance

Test Bank For Financial Statement Analysis A Data Analytics Approach 2024 Release By Robert Resutek and Vernon Richardson Chapter 1-10

Typology: Exams

2024/2025

Available from 06/02/2025

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1

Test Bank For

Financial Statement Analysis A Data Analytics Approach 2024 Release By Robert Resutek and

Vernon Richardson

Chapter 1-10 Answers are at the End of Each Chapter

Chapter 1

Student name:__________

1) Financial statement analysis (FSA) is the process of using analytical techniques to examine

and compare financial statements and other relevant data to evaluate the past and predict the

future for decision-making purposes.

⊚ true

⊚ false

2) In general, it is important to master the past before attempting to forecast the future.

⊚ true

⊚ false

3) Customers use financial statement analysis to determine if they will be paid for the products

or services they provide.

⊚ true

⊚ false

4) Using a company’s past performance as a benchmark for the company’s current performance

is an appropriate diagnostic analytics technique.

⊚ true

⊚ false

5) Which of these stakeholders is most interested in performing financial statement analysis to

address the question of whether trade credit should be extended?

A) Supplier or vendor

B) Shareholder

C) Bank Lender

D) Employee

Partial preview of the text

Download Test Bank For Financial Statement Analysis A Data Analytics Approach 2024 Release By Rober and more Exams Finance in PDF only on Docsity!

Test Bank For

Financial Statement Analysis A Data Analytics Approach 2024 Release By Robert Resutek and Vernon Richardson

Chapter 1- 10 Answers are at the End of Each Chapter

Chapter 1

Student name:__________

Financial statement analysis (FSA) is the process of using analytical techniques to examine and compare financial statements and other relevant data to evaluate the past and predict the future for decision-making purposes. ⊚ true ⊚ false
In general, it is important to master the past before attempting to forecast the future. ⊚ true ⊚ false
Customers use financial statement analysis to determine if they will be paid for the products or services they provide. ⊚ true ⊚ false
Using a company’s past performance as a benchmark for the company’s current performance is an appropriate diagnostic analytics technique. ⊚ true ⊚ false
Which of these stakeholders is most interested in performing financial statement analysis to address the question of whether trade credit should be extended? A) Supplier or vendor B) Shareholder C) Bank Lender D) Employee

“Master the Past” from the FSA-AMPS model includes which of the following types of analytics? A) Descriptive Analytics and Diagnostic Analytics B) Prescriptive Analytics and Diagnostic Analytics C) Descriptive Analytics and Predictive Analytics D) Diagnostic Analytics and Predictive Analytics
“Predict the Future” from the FSA-AMPS model includes which of the following types of analytics? A) Descriptive Analytics and Diagnostic Analytics B) Prescriptive Analytics and Diagnostic Analytics C) Prescriptive Analytics and Predictive Analytics D) Diagnostic Analytics and Predictive Analytics
In which component of the AMPS model does sensitivity analysis fit? A) Ask the Question B) Master the Data C) Perform the Analysis D) Share the Story
Using a visualization to communicate the results of cash flow analysis is an example of which component of the AMPS model? A) Ask the Question B) Master the Data C) Perform the Analysis D) Share the Story
What happens to Bank of America’s profits if the interest rates change in the future from three to four percent? This question is an example of what type of analytics? A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

If there are homogenous products and low switching costs, which of the following five forces would be strong? A) Threat of substitutes B) Threat of new entrants C) Bargaining power of buyers D) Bargaining power of suppliers
If there is high supplier power (with respect to their five forces), which of the following financial statement characteristics will be shown? A) Higher accounts payable turnover ratios B) Higher accounts receivable turnover ratios C) Low long-term asset values D) High inventory turnover ratios
If there is high buyer power (with respect to their five forces), which of the following financial statement characteristics will be shown? A) Lower accounts payable turnover ratios B) Lower accounts receivable turnover ratios C) Low long-term asset values D) High inventory turnover ratios
Which of the following includes the collection of information that is relevant to the company’s profitability and financial condition? A) Data incorporation B) Data reliability C) Data identification D) Data linking
Which of the following investigates the reason why past performance realizations are noted in the financial statements? A) Prescriptive analytics B) Descriptive analytics C) Diagnostic analytics D) Predictive analytics

What possible financial statement characteristics would show Amazon’s buyer power?
Given the descriptive statistics from Lab 1.1 of companies in the retail industry including the mean and the median shown. Is the distribution of total revenue for these companies skewed to the right, or skewed to the left?

Exhibit from Lab 1.

The vertical analysis shown below comes from Lab 1.3, showing each line item in the income statement as a percent of their respective sales, why does Microsoft have the highest gross margin, and highest net income as a percent of sales? How would you explain it in terms of a competitive advantage?

Exhibit from Lab 1.

Answer Key

Test name: chapter 1

1) TRUE

2) TRUE

3) FALSE

4) TRUE

5) A

6) A

7) C

8) C

9) D

10) D

11) A

12) A

13) D

14) A

15) B

16) A

17) A

18) B

19) C

20) C

Essay Suggested Solution would include the following: Lower operating margins due to lower sales prices Lower A/R turnover ratios
Essay The distribution is skewed to the right because the mean is greater than the median. This suggests there are a lower number of high valued companies as compared to the number of lower valued companies.
Essay The interest costs and servicing costs associated with banking services and loans are not deducted as cost of goods sold but rather other operating expenses. Therefore, total sales and total gross margin are the same amounts for regional and money center banks. We also note that they have a high net margin as well.
Essay Microsoft holds a dominant position in the software industry, given windows software, Microsoft Office and other Microsoft products. This is demonstrated by strong profit margins.

What exists when one party in a transaction has more information than the other party? A) Informational friction B) Information subjectivity C) Information asymmetry D) Adverse selection
What exists when there is information asymmetry about product quality that is difficult to convey or determine by the less informed party? A) Informational friction B) Information incongruity C) Information advantage D) Adverse selection
What term is defined as the quality of the data that implies indisputable truth does not exist? A) Information subjectivity B) Information asymmetry C) Information advantage D) Adverse selection
In financial statement analysis, what term represents an attitude that includes a questioning mind that is alert to areas in the financial statements where the reported numbers don’t align with other evidence? A) Professional skepticism B) Analytics mindset C) Information subjectivity D) Adverse selection
What is the name of the term that captures the systematic, or predictable, error between the reported ValueTrue^ and ValueGAAP? A) Bias B) Noise C) Variance D) Standard deviation

What is the name of the term that captures unpredictable differences or variability between the reported ValueTrue^ and Value GAAP (Generally Accepted Accounting Principles)^ that may arise due to estimates made? A) Bias B) Noise C) Variance D) Standard deviation
Since GAAP (Generally Accepted Accounting Principles) requires that inventory be valued at the lower of cost or market, and that valuation might be conservative compared to the true value of the inventory, it would be an example of which of the following? A) Bias B) Measurement Error C) Opportunity Cost D) Noise
If Asset GAAP (Generally Accepted Accounting Principles)^ < AssetTruth, we would call that what kind of bias? A) Aggressive B) Conservative
If financial statements are determined to be incorrect due to fraud or error that may impact a decision maker relying on the financial statements, it is called which of the following? A) Material misstatement B) Immaterial misstatement
Which party to the financial statements reviews the financial statements on a regular basis and provides ratings, or assessments, that indicate the likelihood that the company will pay their debt investors the interest and principal owed in a timely manner? A) Credit analysts B) Secured creditors C) Board of Directors D) Shareholders

Why does reporting contingent liabilities require more discretion than does accounts payable liabilities?
If Company A underestimates bad debt expense this year, how does this affect net income, assets, liabilities, shareholders’ equity, cash flows from operations, cash flows from investing activities, and cash flows from financing activities?

This comes from Dollar General that was evaluated in Lab 2-1. Does having less current liabilities than current assets suggest a potential liquidity problem? Why or why not?

Exhibit from Lab 2-

This comes from horizontal analysis that was evaluated in Lab 2-4. What would be an explanation for the decrease in salaries, wages and benefits as a percentage of sales in 2022?

Exhibit from Lab 2-

Answer Key

Test name: chapter 2

1) TRUE

2) TRUE

3) FALSE

4) FALSE

5) C

6) C

7) D

8) A

9) A

10) A

11) B

12) A

13) B

14) A

15) A

16) B

17) A

18) D

19) A

20) C

Essay Accounts payable is generally the amount expected by the supplier. There is not usually much dispute about what is owed, or much discretion required in the reporting of accounts payable. In contrast, contingent liabilities represent potential obligations that may occur in the future which require extensive judgement about whether anything is owed at all, and if so, an estimate of how much.
Essay If bad debt expense is underestimated, net income, assets, and shareholders' equity will be overstated in the current year. In the following years when accounts are written off, there is no effect on net accounts receivable, but in the first year net accounts receivable is overstated. There is no effect on liabilities or cash flows.
Essay No. There does not appear to be a liquidity problem since current assets are about 40% larger than current liabilities.

Stocktwits is a reliable source for a company’s voluntary disclosures. ⊚ true ⊚ false
It is relatively easy to assign each company to its respective industry based on their principal economic activity. ⊚ true ⊚ false
Analysts may call management directly to get additional information and ask specific questions. ⊚ true ⊚ false
Voluntary disclosures that come from the sources external to the firm include all but which of the following? A) Blogs, Twitter and Message Boards B) Equity Analyst Reports C) Conference Calls D) Industry Reports
Voluntary disclosures that help reduce information asymmetry occurs when management speaks directly to interested parties are called: A) Conference Calls B) Management Discussion and Analysis Disclosures C) Financial Statements D) Equity Analyst Reports
A company that discloses non-GAAP earnings is making what kind of disclosure? A) Voluntary Disclosure B) Mandatory Disclosure C) Required Disclosure D) Managerial Disclosure

Which type of management forecast estimate shows the most confidence in the forecast? A) Range estimate B) Open-ended range estimate C) Point estimate D) Approximate estimate
What type of investors typically hold significant stakes in companies and impose influence on management? A) Passive investors (index funds) B) Activist investors C) Individual investors D) Mutual fund investors
If management forecasts are made, they will generally be disclosed in which of the following? A) Form 8- B) Earnings announcement C) Press release D) Private calls
What type of equity analyst works for brokerage houses and prepares research for its clients? A) Buy-side analysts B) Sell-side analysts C) Independent analysts D) Research analysts
The consensus analyst earnings forecast is the average or median forecast from which type of analyst? A) Buy-side analysts B) Sell-side analysts C) Independent analysts D) Research analysts

Test Bank For Financial Statement Analysis A Data Analytics Approach 2024 Release By Rober, Exams of Finance

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Download Test Bank For Financial Statement Analysis A Data Analytics Approach 2024 Release By Rober and more Exams Finance in PDF only on Docsity!

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1) TRUE

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