Question :
Multiple Choice Questions
22.Which of the following a factor involved in : 1254313
Multiple Choice Questions
22.Which of the following is a factor involved in communicating useful information?
A. Attributes of the users
B. Purpose for which the information will be used
C. Process by which the information is analyzed
D. All of the other answers are correct.
23.Current financial reporting standards assume that users of accounting information:
A. Have a reasonably informed knowledge of business.
B. Have an expert’s understanding of economic and financial events and conditions
C. Have widely differing levels of knowledge about business, and that financial reporting must meet these differing needs.
D. Have only minimal knowledge of business.
24.Select the incorrect statement regarding the information disclosed in financial statements.
A. Financial statements should be detailed enough to answer any financial-related question an investor might have.
B. Some information disclosed in financial statements may be irrelevant to some users.
C. The costs of providing all possible information about a firm would be prohibitively high for the business.
D. When too much information is presented users may suffer from information overload.
25.Common methods of financial statement analysis include all of the following except:
A. Vertical analysis.
B. Horizontal analysis.
C. Incremental analysis.
D. Ratio analysis.
26.Financial statement analysis involves forms of comparison including:
A. Comparing changes in the same item over a number of periods.
B. Comparing key relationships within the same year.
C. Comparing key items to industry averages.
D. All of the other answers are correct.
27.The study of an individual financial statement item over several accounting periods is called:
A. Ratio analysis.
B. Vertical analysis.
C. Horizontal analysis.
D. Time and motion analysis.
28.Select the incorrect statement regarding the analysis of absolute amounts of various accounts reported on the financial statements.
A. Using absolute amounts eliminates the problem of varying materiality levels.
B. To fully appreciate an absolute amount, the analyst must consider the size of other accounts of the business.
C. Economic statistics such as the gross national product are built upon totals of absolute amounts reported by businesses.
D. Financial statement users with expertise in particular industries can look at absolute amounts and assess a company’s performance in a certain area.
29.Select the incorrect statement regarding horizontal analysis.
A. Percentage analysis involves establishing the relationship of one amount to another.
B. In doing horizontal analysis, an account is expressed as a percentage of the previous balance of the same account.
C. Percentage analysis attempts to eliminate the materiality problem of comparing firms of different sizes.
D. A horizontal analysis of cost of goods sold on the income statement includes dividing net income by total revenue.
30.An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:
A. Ratio analysis.
B. Vertical analysis.
C. Horizontal analysis.
D. Contribution analysis.
31.Select the correct statement regarding vertical analysis.
A. Vertical analysis of the income statement involves showing each item as a percentage of sales.
B. Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets.
C. Vertical analysis examines two or more items from the financial statements of one accounting period.
D. All of the other answers are correct.
