ch15 - Chapter 15 COMPANY ANALYSIS Multiple Choice...

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Chapter 15 COMPANY ANALYSIS Multiple Choice Questions Overview 1. The last step in fundamental analysis is: a. economic analysis b. industry analysis c. company analysis d. technical analysis (c, easy) Fundamental Analysis 2. Which of the following is not one of the relative valuation multipliers used in fundamental analysis? a. P/E ratio b. P/S ratio c. P/M ratio d. P/B ratio (c, easy) 3. When analyzing stocks, the major variable of interest to a majority of investors is: a. sales. b. profit margins. c. dividend yield. d. earnings per share. (d, moderate) Chapter Fifteen Company Analysis 187
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The Accounting Aspects of Earnings 4. EPS are of higher quality if: a. the company is a blue chip. b. the auditor's reputation is high. c. they were derived using conservative principles. d. FASB has approved them. (c, moderate) 5. Which of the following are shown on the balance sheet on a cost or market value? a. cash b. stockholders’ equity c. marketable securities d. fixed assets (d, moderate) 6. Which of the following statements regarding retained earnings is not true? a. It is part of stockholders’ equity. b. It represents spendable funds for a company. c. It designates that part of previous earnings not paid out as dividends. d. All of the above statements are true. (b, moderate) 7. The auditor's report: a. guarantees accuracy. b. guarantees the quality of the earnings. c. attests that the statements are a fair presentation of financial position. d. all of the above are true (c, moderate) 8. Which of the following terms best describes the shareholder's equity item of the balance sheet? a. Book value b. Market value c. Current value d. Stock value (a, moderate) Chapter Fifteen Company Analysis 188
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In which of the following sections of a balance sheet are "Inventories" listed? a. Current assets b. Property, plant and equipment, at cost c. Current liabilities d. Shareholders' Equity (a, easy) 10. How is EPS computed? After-tax net income divided by a. current common shares outstanding. b. previous years common shares outstanding. c. treasury shares outstanding. d. average common shares outstanding. (d, moderate) 11. The generally accepted accounting principles (GAAP) require that the EPS be calculated using a a. conservative treatment. b. liberal treatment. c. standard set of rules developed by the accounting profession. d. standard set of rules developed by the SEC. (c, easy) 12. The key item for investors on the income statement is: a. sales. b. gross profit. c. operating expenses. d. after-tax net income. (d, moderate) 13. Earnings derived under GAAP and shown on the income statement is known as: a. reported earnings. b. certified earnings. c. audited earnings. d.
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ch15 - Chapter 15 COMPANY ANALYSIS Multiple Choice...

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