Financial Statement Analysis Test #2 Questions With
Complete Solutions
. In its 2013 annual report, Lockheed Martin reported net
earnings of $2,981 million and dividends paid
of $1,540 million. Your forecast of net income for Lockheed
Martin for 2014 is $3,130 million.
What are projected dividends for the company for 2014?
A) $1,617 million
B) $1,540 million
C) $1,467 million
D) $1,000 million
E) None of the above Correct Answers A.
$3,130 million × ($1,540 million / $2,981 million) = $1,617
million
. In this form of equity carve-out, the parent company exchanges
stock that it owns in the subsidiary for
some of the parent shares owned by its shareholders:
A) Sell-Off
B) Spin-Off
C) Split-Off
D) None of the above Correct Answers C
. Revenue forecasts derived from unit sales and current prices
are usually more accurate than those
derived from dollar sales. Correct Answers True
. Shares outstanding + Shares in treasury = Shares issued.
Correct Answers
,. When projecting the statement of cash flows, the following
represent operating cash outflows (check
all that apply):
A) Decrease in accounts receivable.
B) Increase in inventory
C) Decrease in accounts payable
D) Increase in wages payable
E) Increase in property, plant, and equipment Correct Answers
B and C
. Which of the following describes the analytic process to
determine the depreciation expense included
in the forecasted statement of cash flows?
A) Depreciation is a non-cash expense, thus it is not included in
the statement of cash flows.
B) The year-over-year change in property, plant and equipment
on the balance sheet is equal to
depreciation expense.
C) Property, plant, and equipment from the prior year multiplied
by depreciation rate reported in the
footnotes.
D) Gross property, plant, and equipment from the prior year +
Capital expenditures - Forecasted
gross property, plant, and equipment
E) None of the above Correct Answers E.
Depreciation expense is calculated from historical average
depreciation expense, not the
footnoted rates.
. Which of the following is a common method for forecasting
nonoperating assets?
, A) Use prior-year common-sized balance sheet ratio
B) Apply forecasted sales growth rate to historic balance
C) Assume no change in the account balance
D) Plug the amount based on other balance sheet accounts
E) None of the above Correct Answers C
(Common Stock + Additional Paid-In Capital) / Shares issued =
Issue price Correct Answers
(Common stock + Capital in excess of par) / shares issued =
Average issue price Correct Answers
#39 Correct Answers
Accounts payable days outstanding = Accounts payable /
average daily COGS Correct Answers
Accounts payable turnover = COGS / average Accounts payable
Correct Answers
All of the following are attributes of the ROPI model except:
A) ROPI utilizes both the balance sheet and the income
statement, capturing information in accrual
accounting.
B) ROPI is immune from the effects of differing accounting
policies.
C) ROPI is falsely perceived as influenced by accrual
accounting policies.
D) ROPI model is accurately perceived as influenced by accrual
accounting policies.
E) None of the above Correct Answers D.
Complete Solutions
. In its 2013 annual report, Lockheed Martin reported net
earnings of $2,981 million and dividends paid
of $1,540 million. Your forecast of net income for Lockheed
Martin for 2014 is $3,130 million.
What are projected dividends for the company for 2014?
A) $1,617 million
B) $1,540 million
C) $1,467 million
D) $1,000 million
E) None of the above Correct Answers A.
$3,130 million × ($1,540 million / $2,981 million) = $1,617
million
. In this form of equity carve-out, the parent company exchanges
stock that it owns in the subsidiary for
some of the parent shares owned by its shareholders:
A) Sell-Off
B) Spin-Off
C) Split-Off
D) None of the above Correct Answers C
. Revenue forecasts derived from unit sales and current prices
are usually more accurate than those
derived from dollar sales. Correct Answers True
. Shares outstanding + Shares in treasury = Shares issued.
Correct Answers
,. When projecting the statement of cash flows, the following
represent operating cash outflows (check
all that apply):
A) Decrease in accounts receivable.
B) Increase in inventory
C) Decrease in accounts payable
D) Increase in wages payable
E) Increase in property, plant, and equipment Correct Answers
B and C
. Which of the following describes the analytic process to
determine the depreciation expense included
in the forecasted statement of cash flows?
A) Depreciation is a non-cash expense, thus it is not included in
the statement of cash flows.
B) The year-over-year change in property, plant and equipment
on the balance sheet is equal to
depreciation expense.
C) Property, plant, and equipment from the prior year multiplied
by depreciation rate reported in the
footnotes.
D) Gross property, plant, and equipment from the prior year +
Capital expenditures - Forecasted
gross property, plant, and equipment
E) None of the above Correct Answers E.
Depreciation expense is calculated from historical average
depreciation expense, not the
footnoted rates.
. Which of the following is a common method for forecasting
nonoperating assets?
, A) Use prior-year common-sized balance sheet ratio
B) Apply forecasted sales growth rate to historic balance
C) Assume no change in the account balance
D) Plug the amount based on other balance sheet accounts
E) None of the above Correct Answers C
(Common Stock + Additional Paid-In Capital) / Shares issued =
Issue price Correct Answers
(Common stock + Capital in excess of par) / shares issued =
Average issue price Correct Answers
#39 Correct Answers
Accounts payable days outstanding = Accounts payable /
average daily COGS Correct Answers
Accounts payable turnover = COGS / average Accounts payable
Correct Answers
All of the following are attributes of the ROPI model except:
A) ROPI utilizes both the balance sheet and the income
statement, capturing information in accrual
accounting.
B) ROPI is immune from the effects of differing accounting
policies.
C) ROPI is falsely perceived as influenced by accrual
accounting policies.
D) ROPI model is accurately perceived as influenced by accrual
accounting policies.
E) None of the above Correct Answers D.
