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Test Bank for Financial Reporting Financial Statement Analysis and Valuation 8th Edition By James Wahlen Stephen Baginski Mark Bradshaw (All Chapters, 100% Original Verified, A+ Grade) $18.49
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Test Bank for Financial Reporting Financial Statement Analysis and Valuation 8th Edition By James Wahlen Stephen Baginski Mark Bradshaw (All Chapters, 100% Original Verified, A+ Grade)
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  • August 7, 2024
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Financial Reporting Financial Statement Analysis and Valuation 8e James Wahlen Stephen
Baginski Mark Bradshaw (Test Bank All Chapters, 100% Original Verified, A+ Grade)
Chapter 1—Overview of Financial Reporting, Financial Statement Analysis, and Valuation


MULTIPLE CHOICE

1. The tools for studying industry economics does not include
a. Value chain analysis
b. Classification using Porter’s five forces
c. Classification of cash flows
d. Economic attributes framework
ANS: C PTS: 1

2. Which of the following is a question an analyst would ask when assessing the quality of a firm’s
financial statements?
a. Are the company’s products designed to meet a specific market segment?
b. Has the firm integrated forward into retailing to final consumers?
c. Is the firm diversified across several geographical markets?
d. Do earnings include nonrecurring gains or losses?
ANS: D PTS: 1

3. Which of the following economic characteristics is consistent with a grocery store chain?
a. Minimal competition
b. Extensive competition
c. High net income to sales
d. Differentiated product
ANS: B PTS: 1

4. On a common size basis, which of the following assets is normally largest for an electric utility?
a. Accounts receivable
b. Inventory
c. Property, Plant and Equipment
d. Cash and Marketable Securities
ANS: C PTS: 1

5. On a common size basis, which of the following assets is normally largest for a commercial bank?
a. Accounts and Notes Receivable
b. Inventory
c. Property, Plant and Equipment
d. Cash and Marketable Securities
ANS: A PTS: 1

6. Which of the following is not one of Porter’s five forces?
a. Buyer Power
b. Supplier Power
c. Threat of Regulation
d. Threat of Substitutes
ANS: C PTS: 1

7. When assessing buyer power using Porter’s five forces, which of the following is not consistent with
low buyer power?

1-1

, a. Brand loyalty
b. Control of distribution channel
c. Large number of suppliers
d. Low price
ANS: C PTS: 1

8. The second step in financial statement analysis is to identify the company strategy. Which of the
following is a question an analyst should ask when performing a strategy analysis?
a. Are industry sales growing rapidly or slowly?
b. Do earnings include revenues that appear mismatched with the business model employed
by the firm?
c. Does the industry include a large number of firms selling similar products?
d. What is the company’s degree of geographical diversification?
ANS: D PTS: 1

9. The third step in financial statement analysis is to assess the quality of the firm’s financial statements.
Which of the following is a question an analyst should ask when performing this step?
a. Are industry sales growing rapidly or slowly?
b. Do earnings include revenues that appear mismatched with the business model employed
by the firm?
c. Does the industry include a large number of firms selling similar products?
d. What is the company’s degree of geographical diversification?
ANS: B PTS: 1

10. An example of an intangible asset is
a. A patent
b. Land
c. Investment in another company
d. Raw material inventory
ANS: A PTS: 1

11. Which of the following would not appear as a liability on the balance sheet?
a. A labor contract
b. A note due to a bank
c. Salary due employees at year-end
d. Accounts payable
ANS: A PTS: 1

12. Which of the following assets would appear on the balance sheet at an amount greatly below its fair
market value?
a. Inventory
b. Marketable securities
c. Equipment
d. Brand name
ANS: D PTS: 1

13. The accrual basis of accounting recognizes
a. Revenue when cash is received from customers
b. Expenses when paid
c. Revenue when all or a substantial portion is performed


1-2

, d. Revenue when contracts are signed
ANS: C PTS: 1

14. Which of the following is not an activity reported in the Statement of cash Flows?
a. Operating
b. Investing
c. Manufacturing
d. Financing
ANS: C PTS: 1

15. The cash basis method of accounting can be best described as:
a. The recording of transactions and adjustments so that debits equal credits.
b. The method that equates assets with liabilities and owners’ equity.
c. The method that recognizes revenue when money is received and expenses when money is
paid.
d. The method that matches incurred expenses with related revenues when they are earned.
ANS: C PTS: 1

16. A value chain for an industry sets forth
a. The layers of management the needed to be successful
b. Sequence of activities involved in the creation, manufacture, and distribution of its
products.
c. Sequence of activities involved in a firm's research and development activities.
d. Whether the industry is horizontally or vertically integrated.
ANS: B PTS: 1

17. Which of the following economic characteristics is consistent with a commercial bank?
a. Low barriers to entry.
b. High levels of research and development.
c. Low profit margin on lending activities.
d. Low profit margin on fee-based financial services, such as merger consulting.
ANS: C PTS: 1

18. Which of the following economic characteristics is consistent with a pharmaceutical company?
a. Low barriers to entry.
b. High levels of research and development.
c. Low profit margins.
d. Low business risk.
ANS: B PTS: 1

19. Which of the following economic characteristics is consistent with a grocery store chain?
a. Low barriers to entry.
b. High levels of research and development.
c. High profit margins.
d. Low capital intensity.
ANS: A PTS: 1

20. When attempting to identify the economic characteristics of the industry in which a particular firm
participates an analyst might ask which of the following questions?


1-3

, a. Does technological change play an important role in the firm maintaining a competitive
advantage?
b. Has the firm diversified across several geographic markets?
c. Has the firm recognized revenues at the proper time?
d. Has the firm structured transactions to make it look more profitable than economic
conditions suggest?
ANS: A PTS: 1

21. Which of the following would not inhibit new entrants into a market?
a. Existing technological expertise.
b. Large required capital investment.
c. Lack of rivalry among current participants.
d. Existing patented technology.
ANS: C PTS: 1

22. Current assets are defined as
a. Cash and cash equivalents.
b. All assets expected to be quickly used by the firm.
c. Cash and other assets that the firm expects to sell or consume during the normal operating
cycle of a business, usually one year.
d. Cash and other assets that the firm expects maintain for a period including the normal
operating cycle of a business, usually one year.
ANS: C PTS: 1

23. Which of the following is not an expense of a business?
a. Depreciation
b. Dividends
c. Salaries
d. Advertising
ANS: B PTS: 1

24. Which of the following is not a characteristic of an extraordinary item?
a. Material in amount.
b. Nonrecurring.
c. Unusual given the nature of the firm’s activities.
d. Requires a cash outflow.
ANS: D PTS: 1

25. Which of the following activities is an operating activity?
a. Collections of accounts receivable.
b. Investing in equity securities of other companies.
c. Payment of dividends.
d. Issuing common stock
ANS A PTS: 1

26. What is the principal activity of security analysts?
a. To assign credit ratings.
b. To apply IFRS adjustments.
c. To value firms.
d. To assess the need for audits.


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