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Financial Statement Analysis Basics
Check your understanding about basic premises and principles of financial statement Analysis
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In relation to a company, investors are least concerned with:
1 point
Its short-term liquidity
Its solvency
Its future share price
Its profitability
Clear selection
Which basic accounting concept prohibits firms from frequently changing their method of valuing inventory?
1 point
Consistency.
Historical cost.
Conservatism.
Disclosure.
Clear selection
The difference between total current assets and total current liabilities is:
1 point
Net assets
Trade working capital
Accounting working capital
Operating working capital
Clear selection
Financial statements report only items that have significant economic value.” This statement summarizes which basic accounting concept?
1 point
Matching.
Disclosure.
Realization.
Materiality.
Clear selection
Which of the following is not a reason financial analysis is useful to investors?
1 point
Investors read financial statements either to monitor their current investments or to plan their future ones
Future trends can always be accurately predicted
Current position is the base on which future performance must be built
Past performance is often a good indicator of future performance
Clear selection
In order to have a smoothed rate of growth, we use:
1 point
Financial ratios
Common-size statements
Trends statements
CAGR
Clear selection
In relation to a company, creditors are least concerned with:
1 point
Its short-term liquidity
Its solvency
Its future share price
Its profitability
Clear selection
Keeping the records of the business separate from the personal records of the owner of the business is said to be adherence to which accounting principle or concept?
1 point
Business entity principle
Continuing-concern concept
Objectivity principle
Realization principle
Clear selection
Which basic accounting concept does the following statement summarize?“Transactions are recorded using price paid, not current prices.”
1 point
Matching.
Historical cost.
Conservatism.
Disclosure.
Clear selection
Performance review of a business must compare against
1 point
the performance of a similar business within its industrial sector
an appropriate standard for comparison
a business of similar size
the performance of a similar business outside its industrial sector
Clear selection
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