FIN 461 EXAM 3 QUESTIONS AND
ANSWERS ALL CORRECT
When comparing a US company that uses the last in, first out (LIFO) method of
inventory with companies that prepare their financial statements under international
financial reporting standards (IFRS), analysts should be aware that according to IFRS,
the LIFO method of inventory:
A) is never acceptable
B) is always acceptable
C) is acceptable when applied to finished goods inventory only - Answer- is never
acceptable
To compute tangible book value, an analyst would
A) add goodwill to stockholder's equity
B) add all intangible assets to stockholders' equity
C) subtract all intangible assets from stockholder's equity - Answer- subtract all
intangible assets from stockholder's equity
Which of the following is an off-balance-sheet financing technique? The use of:
A) capital leases
B) operating leases
C) the last in, first out method - Answer- operating leases
To better evaluate the solvency of a company, an analyst would most likely add to total
liabilities
A) the present value of future capital lease payments.
B) the total amount of future operating lease payments.
, C) the present value of future operating lease payments. - Answer- the present value of
future operating lease payments.
....which best describes reasonable conclusions an analyst might make about a
company's efficiency?
A) total asset turnover
B) current ratio
C) asset growth faster than turnover revenue growth - Answer- asset growth faster than
turnover revenue growth
....which best describes reasonable conclusions an analyst might make about a
company's solvency?
A) debt-to-assets ratio
B) interest coverage
C) growth in profits - Answer- interest coverage
....which best describes reasonable conclusions an analyst might make about a
company's liquidity?
A) debt-to-assets
B) interest coverage
C) current ratio - Answer- current ratio
....which best describes reasonable conclusions an analyst might make about a
company's profitability?
A) debt-to-assets
B) net profit margin
C) shareholders equity - Answer- net profit margin
Comparison of a company's financial results to other peer companies for the same time
period is called:
A) Technical Analysis
ANSWERS ALL CORRECT
When comparing a US company that uses the last in, first out (LIFO) method of
inventory with companies that prepare their financial statements under international
financial reporting standards (IFRS), analysts should be aware that according to IFRS,
the LIFO method of inventory:
A) is never acceptable
B) is always acceptable
C) is acceptable when applied to finished goods inventory only - Answer- is never
acceptable
To compute tangible book value, an analyst would
A) add goodwill to stockholder's equity
B) add all intangible assets to stockholders' equity
C) subtract all intangible assets from stockholder's equity - Answer- subtract all
intangible assets from stockholder's equity
Which of the following is an off-balance-sheet financing technique? The use of:
A) capital leases
B) operating leases
C) the last in, first out method - Answer- operating leases
To better evaluate the solvency of a company, an analyst would most likely add to total
liabilities
A) the present value of future capital lease payments.
B) the total amount of future operating lease payments.
, C) the present value of future operating lease payments. - Answer- the present value of
future operating lease payments.
....which best describes reasonable conclusions an analyst might make about a
company's efficiency?
A) total asset turnover
B) current ratio
C) asset growth faster than turnover revenue growth - Answer- asset growth faster than
turnover revenue growth
....which best describes reasonable conclusions an analyst might make about a
company's solvency?
A) debt-to-assets ratio
B) interest coverage
C) growth in profits - Answer- interest coverage
....which best describes reasonable conclusions an analyst might make about a
company's liquidity?
A) debt-to-assets
B) interest coverage
C) current ratio - Answer- current ratio
....which best describes reasonable conclusions an analyst might make about a
company's profitability?
A) debt-to-assets
B) net profit margin
C) shareholders equity - Answer- net profit margin
Comparison of a company's financial results to other peer companies for the same time
period is called:
A) Technical Analysis
