Question : 1. A banker analyzing a company which operates in the automotive : 1224832

1. A banker is analyzing a company which operates in the automotive industry. Which of the following will likely be the banker’s most important consideration in determining whether the company should receive a loan? 
A. The automotive plant’s capacity.
B. Inflation has been consistently high for several years.
C. The company has state-of-the-art automated equipment which enhances the efficiency of its operating process.
D. The company has a large amount of interest payments related to other outstanding loans.

 

2. Each of the following is included in a public company’s MD&A except: 
A. material trends, events, or known uncertainties.
B. statements about what management expects to occur in the future.
C. management’s views of the financial condition and performance of the company.
D. names and experience of the company’s managers, directors, and officers.

 

3. Percentage analyses, ratios, turnovers, and other measures of financial position and operating results are: 
A. a substitute for sound judgment.
B. useful analytical measures.
C. enough information for analysis, industry information is not needed.
D. unnecessary for analysis, but reaction is better.

 

4. Horizontal analysis is analysis in which: 
A. financial statement lines are expressed as a percent of the base (earliest) year.
B. all items are presented as a percentage of one selected item on the financial statement.
C. a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements.
D. ratios are presented for the past two accounting periods.

 

5. Which of the following statements is true regarding horizontal analysis? 
A. It can only be used with balance sheet accounts.
B. It can only be used with income statement accounts.
C. It expresses each financial statement line item as a percent of the largest amount on the statement.
D. It expresses each financial statement line item as a percent of the earliest year amount.

 

6. Which of the following statements is true regarding vertical analysis? 
A. Vertical analysis compares financial data for a single entity over time.
B. Vertical analysis is used to compare companies of different sizes.
C. Vertical analysis compares trends of one company with a different company.
D. Vertical analysis expresses one item of a statements as a percentage of another item in a different statement.

 

7. Which of the following profitability ratios would be determined through a common-size vertical analysis of the income statement? 
A. Gross profit percentage
B. Return on assets
C. Return on equity
D. Earnings per share

 

8. In a common-size income statement, the 100% amount is: 
A. net income.
B. operating income.
C. gross profit.
D. net sales.

 

9. In a common-size balance sheet, the 100% amount is: 
A. current assets.
B. working capital.
C. total assets.
D. total stockholders’ equity.

 

10. The percentage analysis of increases and decreases in individual items in comparative financial statements is called: 
A. vertical analysis.
B. solvency analysis.
C. profitability analysis.
D. horizontal analysis.

 

 

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