Financial Statement Analysis by Wallace Davidson | 9781119743217 | 1119743214 | Holooly

Financial Management

Financial Statement Analysis

119 SOLVED PROBLEMS

Question: 6.KC.5

To improve Biscayne’s profit margin, what action would you suggest? a. Increase sales. b. Cut expenses. c. Downsize. d. None of the above would likely fix the problem. ...

Verified Answer:

a. Incorrect. This is not correct because sales gr...

Question: 6.KC.4

Biscayne has _______ leverage. a. Excessive. b. Inadequate. c. The right amount of. d. The wrong kind of. ...

Verified Answer:

a. Correct. The company’s debt to equity ratio is ...

Question: 6.KC.3

Best Buy can be considered a. An overtrader. b. An undertrader. c. A company with a collection period problem. d. All of the above. ...

Verified Answer:

a. Correct. Best Buy is an overtrader, so answer a...

Question: 6.KC.2

The quality of Best Buy’s liquidity has ________ over the five-year period. a. Deteriorated. b. Improved slightly. c. Improved considerably. d. Not changed. ...

Verified Answer:

a. Correct. The ratios of receivable and inventory...

Question: 6.KC.1

Over the five-year period, the relative quantity of Best Buy’s liquidity has a. Increased. b. Decreased. c. Not changed materially. d. Cannot be determined. ...

Verified Answer:

a. Incorrect. This answer cannot be correct becaus...

Question: 5.RQ.2

What is the purpose of an industry analysis? ...

Verified Answer:

An industry analysis lets the analyst show where a...

Question: 5.RQ.1

What is the major advantage of the cause-and-effect ratio system? ...

Verified Answer:

This approach not only details a company’s financi...

Question: 5.KC.6

When conducting an analysis of financial statements, it is important to take corrective action by attacking the a. Underlying cause of the problems. b. Symptoms of the problem as indicated by the effect ratios. c. Profit ratios first and foremost. d. Bankers. ...

Verified Answer:

a. Correct. It is the cause of the problem, rather...

Question: 5.KC.5

Which is not generally a problem with using industry averages? a. A company may be a conglomerate. b. The company may use different accounting procedures than the industry. c. Industry data is not available at year-end. d. All of the above. ...

Verified Answer:

a. Incorrect. If a company is a conglomerate, ther...

Question: 5.KC.4

A company with ratios that match the industry average is in _______ shape. a. Poor. b. Average. c. Great. d. Impossible to tell. ...

Verified Answer:

a. Incorrect. Poor cannot be correct because a com...

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