Financial Analysis MCQ Questions Answers

1. Routine requests should begin with ________.

2. Routine replies and positive messages should close with ________.

3. The size of the sampling error is ________.

4. Which is a flaw with financial analysis?

5. Which is traded in the capital markets?

6. Firm A has a Return on Equity (ROE) equal to 24%, while firm B has a ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4. From this, it can be assessed that ______.

7. Insider trading _____.

8. Which ratio would you use to assess a company's ability to pay bills?

9. Government mandated requirements, such as installing pollution control equipment ______.

10. In 2002, the US passed the Sarbanes-Oxley law which ____.

11. What is the purpose of measuring profitability?

12. What does the Weighted Average Cost of Capital (WACC) calculate?

13. When a company files a statement of their financial plans for the next two years with the SEC, it is called a ______.

14. Which is/are the primary financial statements used to measure solvency?

15. What is the purpose of measuring liquidity?

16. Asset Turnover is defined as ______.

17. Which is not a fundamental of accounting?

18. Pro forma statements are _______ statements.

19. Planning for future growth is called ________.

20. Retained earnings will change over time because of several factors. Which factor would lead to an increase in the Retained Earnings?

21. What is the purpose of measuring stability?

22. Which cash collection technique is the most cost-effective for companies with many locations?

23. How does Cash Flow Return on Investment differ from most financial ratios?

24. What is the DuPont analysis?

25. The three sections of a Statement of Cash Flows are _____.

26. What type of analysis will describe how changes in volume affect costs and profits?

27. Which security makes up the majority of external financing for corporations?

28. How often can a company change its inventory valuation methodology and still be compliant with GAAP?

29. Which financial statement best allows a firm to assess its ability to pay dividends?

30. What is the formula for Return on Investor Capital?

31. Which is not an area which is assessed by financial analysis?

32. If two companies have equal risk, which one will have the higher stoack price?

33. Which does the cash flow cycle measure?

34. Which inventory method will always produce the same results under both a periodic and a perpetual system?

35. Which item swould be accounted for as an expense?

36. If a firm has $100 in inventories, a current ratio equal to 1.2, and a quick ratio equal to 1.1, what is the firm's Net Working Capital?

37. Which is an example of a variable cost?

38. Which is not a financial intermediary?

39. Rate of profit (r) is defined as ______.

40. A company wants to increase its current ratio. Which would help the most?

41. Which short-term financing rate always requires the use of international data?

42. Gerald's had opening total stockholders' equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Their net income was $180,000. No additional investments were made. However, some amount was paid as dividend during the year. What was the amount of the dividend paid?

43. Which would not be included in a balance sheet?

44. What does Return on Assets indicate?

45. Which is a characteristic of an efficient market?

46. What does CAPM stand for?

47. Which is considered a profitability measure?

48. What is meant by 'the goal of the corporation is to maximize shareholder wealth'?

49. Which type of firm may operate with high operating leverage?

50. The accounting scandals of recent years ______.

51. Which is an example of an area of business where use of 'questionable' ethics is considered a necessity?

52. CAPM formula calculates which of the following?

53. Accounting scandals of the past 5 years ______.

54. Which equation properly represents a derivation of the fundamental accounting equation?

55. What is financial analysis?

56. An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the final inventory valuation is ________.

57. In breakeven analysis, if fixed costs rise, then the breakeven point will __________.

58. What is one caveat when calculating ROA and comparing to other companies?

59. If a company using financing has a 60% chance of a $75,000 return under normal conditions but a 40% chance of a $20,000 return when money is tight and borrowing costs are higher, what is the expected return for this firm ?

60. Which report does a publicly traded company file quarterly with the SEC?

61. What is operating leverage defined as?

62. Which is the primary financial statement used to measure profitability?

63. What is historical value?

64. Which transaction would have no impact on the stockholder's equity?

65. With which regulatory bodies would a publicly traded company be much more involved than a private company would be?

66. Financial managers use the _____________ to plan for monthly financing needs.

67. If a company has a high P/E ratio relative to it's competitors ____.

68. Which is not a part of cost of goods sold?

69. What does the Price to Earnings (P/E) ratio demonstrate?

70. Which is a flaw with financial analysis?

71. Why do you not subtract interest expense from operating profit when calculating Return on Investment Capital?

72. By doing/issuing which could a company raise short-term funds by selling receivables?

73. How does Gross Income differ from Net Income?

74. To measure a firm's solvency as completely as possible, we need to consider ______.

75. Operating Efficiency is defined as ______.

76. Why would a company calculate their Risk Adjusted Return on Capital?

77. Return on Assets is defined as _______.

78. Deviations from Purchasing Power Parity (PPP) disappear quickly such that the real exchange rate is one most of the time.

79. A firm should not hedge its short-term (up to 1 year) foreign currency exposure since exchange rates are unpredictable in the short run.

80. The profitability of a vacation resort in Hawaii that does all its transactions in USD cannot be exposed to fluctuations of the USD against other currencies.

81. Under U.S GAAP, where is the dividend received so it will be presented in the cash flow statement?

82. B&A Company has an EBIT of $20 million and faces a tax rate of 40% and an interest rate of 6%. What are B&A's Earnings?

83. When using NPV the discount rate should take into account:

84. When discussing the NPV of a start-up company in addition to considering the cost of capital its important to consider this concept to properly discount cash flows?

85. Which of the following indicates off-balance-sheet activities of a bank?

86. True or False? APR is always less than or equal to EAR.

87. What type of asset is 'Stock' classified as?

88. What is the relative measure of variation in Risk Theory?

89. What does the market risk premium indicate?

90. In the American tax system, what is total Effective Tax Rate (TETR)? (Tf=federal tax, Ts=state tax)

91. A company has a high quality of earnings, when it has ....

92. Which of these is an example of an amortized bond?

93. A method to represent an unknown variable in a financial plan is known as a:

94. A firm faces leverage both explicitly and implicitly. Which of the following is a type of leverage?

95. Which of the following best describes period expense?

96. When valuing a start-up with limited funding these types of ratios are most important

97. Which valuation method is suitable to use when a company's leverage structure is constantly changing over time?

98. Accounting Profit and Economic Profit differ most in their attention to:

99. What is the main financial disadvantage of a C-Corp?

100. When comparing mutually exclusive projects to undertake which methodology is most appropriate?