Test Bank for Financial Reporting Financial Statement Analysis and Valuation 9th Edition By James Wahlen, Stephen Baginski, Mark Bradshaw (All Chapters, 100% Original Verified, A+ Grade)

This is Test Bank zip file. PDF file is giving error in upload, thats why zip file is added. Check Sample Preview: Chapter 1—Overview of Financial Reporting, Financial Statement Analysis, and Valuation MULTIPLE CHOICE 1. The tools for studying industry economics does not include: a. Value chain analysis b. Classification using Porter’s five forces c. Classification of cash flows d. Economic attributes framework ANS: C PTS: 1 2. Which of the following is a question an analyst would ask when assessing the quality of a firm’s financial statements? a. Are the company’s products designed to meet a specific market segment? b. Has the firm integrated forward into retailing to final consumers? c. Is the firm diversified across several geographical markets? d. Do earnings include nonrecurring gains or losses? ANS: D PTS: 1 3. Which of the following economic characteristics is consistent with a grocery store chain? a. Minimal competition b. Extensive competition c. High net income to sales d. Differentiated product ANS: B PTS: 1 4. On a common size basis, which of the following assets is normally largest for an electric utility? a. Accounts receivable b. Inventory c. Property, Plant and Equipment d. Cash and Marketable Securities ANS: C PTS: 1 5. On a common size basis, which of the following assets is normally largest for a commercial bank? a. Accounts and Notes Receivable b. Inventory c. Property, Plant and Equipment d. Cash and Marketable Securities ANS: A PTS: 1 6. Which of the following is not one of Porter’s five forces? a. Buyer Power b. Supplier Power c. Threat of Regulation d. Threat of Substitutes ANS: C PTS: 1 Financial Reporting Financial Statement Analysis and Valuation, 9e James Wahlen, Stephen Baginski, Mark Bradshaw (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1-2 7. When assessing buyer power using Porter’s five forces, which of the following is not consistent with low buyer power? a. Brand loyalty b. Control of distribution channel c. Large number of suppliers d. Low price ANS: C PTS: 1 8. The second step in financial statement analysis is to identify the company strategy. Which of the following is a question an analyst should ask when performing a strategy analysis? a. Are industry sales growing rapidly or slowly? b. Do earnings include revenues that appear mismatched with the business model employed by the firm? c. Does the industry include a large number of firms selling similar products? d. What is the company’s degree of geographical diversification? ANS: D PTS: 1 9. The third step in financial statement analysis is to assess the quality of the firm’s financial statements. Which of the following is a question an analyst should ask when performing this step? a. Are industry sales growing rapidly or slowly? b. Do earnings include revenues that appear mismatched with the business model employed by the firm? c. Does the industry include a large number of firms selling similar products? d. What is the company’s degree of geographical diversification? ANS: B PTS: 1 10. An example of an intangible asset is: a. A patent b. Land c. Investment in another company d. Raw material inventory ANS: A PTS: 1 11. Which of the following would not appear as a liability on the balance sheet? a. A labor contract b. A note due to a bank c. Salary due employees at year-end d. Accounts payable ANS: A PTS: 1 12. Which of the following assets would appear on the balance sheet at an amount greatly below its fair market value? a. Inventory b. Marketable securities c. Equipment d. Brand name ANS: D PTS: 1 1-3 13. The accrual basis of accounting recognizes: a. Revenue when cash is received from customers b. Expenses when paid c. Revenue when all or a substantial portion is performed d. Revenue when contracts are signed ANS: C PTS: 1 14. Which of the following is not an activity reported in the Statement of cash Flows? a. Operating b. Investing c. Manufacturing d. Financing ANS: C PTS: 1 15. The cash basis method of accounting can be best described as: a. The recording of transactions and adjustments so that debits equal credits. b. The method that equates assets with liabilities and owners’ equity. c. The method that recognizes revenue when money is received and expenses when money is paid. d. The method that matches incurred expenses with related revenues when they are earned. ANS: C PTS: 1 16. A value chain for an industry sets forth: a. The layers of management the needed to be successful b. Sequence of activities involved in the creation, manufacture, and distribution of its products. c. Sequence of activities involved in a firm's research and development activities. d. Whether the industry is horizontally or vertically integrated. ANS: B PTS: 1 17. Which of the following economic characteristics is consistent with a commercial bank? a. Low barriers to entry. b. High levels of research and development. c. Low profit margin on lending activities. d. Low profit margin on fee-based financial services, such as merger consulting. ANS: C PTS: 1 18. Which of the following economic characteristics is consistent with a pharmaceutical company? a. Low barriers to entry. b. High levels of research and development. c. Low profit margins. d. Low business risk. ANS: B PTS: 1 19. Which of the following economic characteristics is consistent with a grocery store chain? a. Low barriers to entry. b. High levels of research and development. 1-4 c. High profit margins. d. Low capital intensity. ANS: A PTS: 1 20. When attempting to identify the economic characteristics of the industry in which a particular firm participates an analyst might ask which of the following questions? a. Does technological change play an important role in the firm maintaining a competitive advantage? b. Has the firm diversified across several geographic markets? c. Has the firm recognized revenues at the proper time? d. Has the firm structured transactions to make it look more profitable than economic conditions suggest? ANS: A PTS: 1 21. Which of the following would not inhibit new entrants into a market? a. Existing technological expertise. b. Large required capital investment. c. Lack of rivalry among current participants. d. Existing patented technology. ANS: C PTS: 1 22. Current assets are defined as: a. Cash and cash equivalents. b. All assets expected to be quickly used by the firm. c. Cash and other assets that the firm expects to sell or consume during the normal operating cycle of a business, usually one year. d. Cash and other assets that the firm expects maintain for a period including the normal operating cycle of a business, usually one year. ANS: C PTS: 1 23. Which of the following is not an expense of a business? a. Depreciation b. Dividends c. Salaries d. Advertising ANS: B PTS: 1 24. Which of the following is not a characteristic of an extraordinary item? a. Material in amount. b. Nonrecurring. c. Unusual given the nature of the firm’s activities. d. Requires a cash outflow. ANS: D PTS: 1 25. Which of the following activities is an operating activity? a. Collections of accounts receivable. b. Investing in equity securities of other companies. c. Payment of dividends. 1-5 d. Issuing common stock ANS A PTS: 1 26. What is the principal activity of security analysts? a. To assign credit ratings. b. To apply IFRS adjustments. c. To value firms. d. To assess the need for audits. ANS: C PTS: 1 27. All of the following are the building blocks for financial statement analysis except: a. Targeting growth opportunities that diversify exchange rates, risk exposure, and political uncertainty. b. Describing strategies that a firm pursues to differentiate itself from competitors in order to evaluate competitive advantages, sustainability of the firm’s earnings, and its risks. c. Evaluating the financial statements, including the accounting concepts and methods that underlie them and the quality of the information they provide. d. Identification of the economic characteristics of the industries and the relation of those economic characteristics to the various financial statement ratios. ANS: A PTS: 1 28. When a firm attempting to create unique products or services for particular market niches, in order to achieve relatively high profit margins, this is best known as: a. A quality strategy b. A low-cost leadership strategy c. A vertical integration strategy d. A product differentiation strategy ANS: D PTS: 1 29. The following steps make up the steps in financial statement analysis: 1. Identify the strategies the firm pursues to gain and sustain a competitive advantage. 2. Analyze the current profitability and risk of the firm using information in the financial statements. 3. Value the firm. 4. Identify the economic characteristics and competitive dynamics of the industry in which a particular firm participates. 5. Assess the quality of the firm’s financial statements and, if necessary, adjust them for such desirable characteristics as sustainability or comparability. 6. Prepare forecasted financial statements. Which of the following is the proper order for these interrelated sequential steps? a. 4,1,5,2,6,3 b. 1,2,3,4,5,6 c. 4,6,2,5,1,3 d. 1,4,2,5,3,6 ANS: A PTS: 1 1-6 30. All of the following are reasons that pharmaceutical companies have higher barriers for entry than grocery stores except: a. There is lengthy government testing and approval required. b. Research and development is a lengthy and uncertain process. c. Patent protection is needed for exclusive rights. d. The largest asset is typically capital intensive Property, Plant and Equipment. ANS: D PTS: 1 31. Which forces typically represent vertical competition in a value chain? a. Potential entry and substitutes. b. Buyer power and rivalry among existing firms c. Supplier power and potential entry. d. Buyer power and supplier power ANS: D PTS: 1 32. Which forces typically represent horizontal competition in a value chain? a. Rivalry among existing firms and supplier power. b. Potential entry and buyer power. c. Substitutes and potential entry. d. Buyer power and supplier power. ANS: C PTS: 1 33. Which of the following is an independent entity comprising 15 members and a full-time professional staff that specifies acceptable accounting principles known as IFRS? a. FASB b. IASB c. SEC d. GAAP ANS: B PTS: 1 34. Which two organizations are working together to harmonize financial reporting worldwide? a. FASB and IASB b. GAAP and FASB c. SEC and FASB d. EU and SEC ANS: A PTS: 1 35. Which of these would be considered Property, Plant, and Equipment? a. Trademark b. Office Building c. Patent d. Goodwill ANS: B PTS: 1 36. Extraordinary gains and losses arise from events that have all the following characteristics except: a. They are unusual given the nature of the firm’s activity. b. They are nonrecurring. c. They are material in amount.