Chapter_15-Study_guide - Chapter 15 COMPANY ANALYSIS...

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Chapter 15 COMPANY ANALYSIS Multiple Choice Questions 1. 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) 2. 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) 3. 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) 4. 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) 5. Which of the following terms best describes the shareholder's equity item of the balance sheet? Chapter Fifteen Company Analysis 187
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a. Book value b. Market value c. Current value d. Stock value (a) 6. 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) 7. 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) 8. 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) 9. The key item for investors on the income statement is: a. sales. b. gross profit. c. operating expenses. d. after-tax net income. (d) 10. Earnings derived under GAAP and shown on the income statement is known as: a. reported earnings. Chapter Fifteen Company Analysis 188
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b. certified earnings. c. audited earnings. d. verified earnings. (a) 11. Which of the following is not one of the parts of the cash flow statement? a. cashflow from operating activities. b. cashflow from sales activities. c. cashflow from investing activities. e. cashflow from financing activities. (b) 12. Which of the following mandated that companies, starting in 2004, must submit an annual report to the SEC outlining the effectiveness of their internal accounting controls? a. SEC Amendments Act b. SIPC c. Glass-Stegall Act d. Sarbanes-Oxley Act (d) 13. Which of the following represents the rate at which a company can grow from internal sources? a. return on assets b. sustainable growth rate c. adjusted EPS d. return on equity (b) 14. One way to calculate EPS is: a. ROA x Book value per share. b.
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This note was uploaded on 06/02/2011 for the course FINA 3331 taught by Professor Staff during the Spring '08 term at Texas A&M University, Corpus Christi.

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Chapter_15-Study_guide - Chapter 15 COMPANY ANALYSIS...

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