Find Complete and recently updated Correct Question and answers of Financial Analysis. All Answers updated regularly with new questions. Upwork Financial Analysis test answers of 2016.

Question:* Return on Assets is defined as _______.

Answer: • Net Income/Total Assets

Question:* Why would a company calculate their Risk Adjusted Return on Capital?

Answer: • Gives companies the ability to allocate capital in the optimal structure

Question:* What is the purpose of measuring profitability?

Answer: • To measure a company's ability to earn a profit and continue to grow in the short-term and long-term

Question:* Operating Efficiency is defined as ______.

Answer: • Net Income/Operating Expenses

Question:* To measure a firm's solvency as completely as possible, we need to consider ______.

Answer: • the firm's capital structure and the liquidity of its current assets

Question:* How does Gross Income differ from Net Income?

Answer: • Gross Income measures profitability before operating expenses, whereas Net Income is calculated after all operating expenses

Question:* Which of the following are traded in the capital markets?

Answer: • All of the above

Question:* By doing/issuing which of the following could a company raise short-term funds by selling receivables?

Answer: • By pledging inventory

Question:* Government mandated requirements, such as installing pollution control equipment ______.

Answer: • may reduce a company's earnings but are considered a necessary social responsibility for the firm

Question:* Why do you not subtract interest expense from operating profit when calculating Return on Investment Capital?

Answer: • It is important to include interest as it is part of expenses

Question:* Which of the following is a flaw with financial analysis?

Answer: • Each company uses different formulas to calculate the ratios

Question:* What does the Price to Earnings (P/E) ratio demonstrate?

Answer: • A company's stock price relative to its earnings. Higher growth companies have higher P/E ratios

Question:* Which of the following is not a part of cost of goods sold?

Answer: • Capital

Question:* What is the purpose of measuring solvency?

Answer: • To determine a firm's ability to pay its creditors in the long term

Question:* If a company has a high P/E ratio relative to it's competitors ____.

Answer: • everyone should invest in this stock and not the competitor's

Question:* Financial managers use the _____________ to plan for monthly financing needs.

Answer: • capital budget

Question:* With which of the following regulatory bodies would a publicly traded company be much more involved than a private company would be?

Answer: • SEC

Question:* Which of the following transactions would have no impact on the stockholder's equity?

Answer: • Purchase of land from the proceeds of a bank loan

Question:* Which of the following is a flaw with financial analysis?

Answer: • Changes in accounting policy can drastically affect the results of a ratio, making comparison analysis difficult

Question:* What is historical value?

Answer: • The original cost or price paid for an asset

Question:* Which is the primary financial statement used to measure profitability?

Answer: • Balance Sheet

Question:* What is operating leverage defined as?

Answer: • Extent to which variable costs are utilized

Question:* Which report does a publicly traded company file quarterly with the SEC?

Answer: • 10Q

Question:* If a company using financing has a 60% chance of a $75,000 return under normal conditions but a 40% chance of a $20,000 return when money is tight and borrowing costs are higher, what is the expected return for this firm ?

Answer: • $53,000

Question:* What is one caveat when calculating ROA and comparing to other companies?

Answer: • Carrying value of assets may be valued differently (historical, market) by different companies

Question:* Which is/are the primary financial statements used to measure stability?

Answer: • Balance Sheet

Question:* Which ratio would you use to assess a company's ability to pay bills?

Answer: • Current ratio

Question:* In breakeven analysis, if fixed costs rise, then the breakeven point will __________.

Answer: • rise

Question:* Firm A has a Return on Equity (ROE) equal to 24%, while firm B has a ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4. From this, it can be assessed that ______.

Answer: • Firm B has a higher profit margin than firm A

Question:* In 2002, the US passed the Sarbanes-Oxley law which ____.

Answer: • was developed in response to the accounting scandals at Enron, Tyco, WorldCom and others

Question:* An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the final inventory valuation is ________.

Answer: • Weighted-average

Question:* What is financial analysis?

Answer: • Comparing ratios using numbers from the income statement and balance sheet

Question:* Which of the following equations properly represents a derivation of the fundamental accounting equation?

Answer: • Assets - liabilities = owner's equity

Question:* Accounting scandals of the past 5 years ______.

Answer: • resulted in criminal convictions of senior executives at large US corporations like Enron and WorldCom

Question:* CAPM formula calculates which of the following?

Answer: • Expected return on equity

Question:* Which of the following is an example of an area of business where use of "questionable" ethics is considered a necessity?

Answer: • None of the statements above is correct

Question:* The accounting scandals of recent years ______.

Answer: • have been dismissed as falling within the latitude of judgment for applying GAAP rules

Question:* Which ratio would you use to measure how effectively the firm uses the money shareholders have invested?

Answer: • Earnings per share

Question:* Which of the following types of firms may operate with high operating leverage?

Answer: • An auto manufacturing facility

Question:* What is meant by "the goal of the corporation is to maximize shareholder wealth"?

Answer: • Achieve the highest possible value for the firm

Question:* Which of the following is considered a profitability measure?

Answer: • Return on Assets

Question:* Which is/are the primary financial statements used to measure liquidity?

Answer: • Balance Sheet

Question:* What does CAPM stand for?

Answer: • Current Asset Pricing Model

Question:* Which is a characteristic of an efficient market?

Answer: • Prices adjust rapidly to new information

Question:* What does Return on Assets indicate?

Answer: • How well a company employs its capital investments

Question:* Which of the following would not be included in a balance sheet?

Answer: • Sales

Question:* Gerald's had opening total stockholders' equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Their net income was $180,000. No additional investments were made. However, some amount was paid as dividend during the year. What was the amount of the dividend paid?

Answer: • $60,000

Question:* Which short-term financing rate always requires the use of international data?

Answer: • LIBOR

Question:* A company wants to increase its current ratio. Which of the following would help the most?

Answer: • Creating more stringent collection policies to decrease accounts receivable

Question:* Rate of profit (r) is defined as ______.

Answer: • r=(surplus-value)/(capital invested)

Question:* Which of the following is not a financial intermediary?

Answer: • Credit unions

Question:* Which is an example of a variable cost?

Answer: • Raw material

Question:* Insider trading _____.

Answer: • is not legal under any circumstances

Question:* If a firm has $100 in inventories, a current ratio equal to 1.2, and a quick ratio equal to 1.1, what is the firm's Net Working Capital?

Answer: • $100

Question:* Which of these items would be accounted for as an expense?

Answer: • Purchase of land

Question:* Which of the following inventory methods will always produce the same results under both a periodic and a perpetual system?

Answer: • All of these

Question:* Which of the following does the cash flow cycle measure?

Answer: • The time between purchase of raw materials and collection of cash

Question:* If two companies have equal risk, which one will have the higher stock price?

Answer: • All of the above

Question:* Which of the following is not an area which is assessed by financial analysis?

Answer: • Adequate Cash balances

Question:* What is the formula for Return on Investor Capital?

Answer: • ROIC = (NetOperatingProfitLessAdjustedTaxes) / (InvestedCapital)

Question:* Which financial statement best allows a firm to assess its ability to pay dividends?

Answer: • Statement of Retained Earnings

Question:* How often can a company change its inventory valuation methodology and still be compliant with GAAP?

Answer: • Once per year, but not every year

Question:* Which security makes up the majority of external financing for corporations?

Answer: • Bank loans

Question:* What type of analysis will describe how changes in volume affect costs and profits?

Answer: • Break even analysis

Question:* The three sections of a Statement of Cash Flows are _____.

Answer: • Operating, investing, financing

Question:* What is the DuPont analysis?

Answer: • Breaks Return on Equity into 3 pieces: Operating Efficiency, Asset Use Efficiency, Financial Leverage

Question:* How does Cash Flow Return on Investment differ from most financial ratios?

Answer: • It assumes the stock market sets prices based on cash flow, not profitability

Question:* Which cash collection technique is the most cost-effective for companies with many locations?

Answer: • Regional collection offices

Question:* What is the purpose of measuring stability?

Answer: • To determine the firm's ability to stay in business in the long run

Question:* Retained earnings will change over time because of several factors. Which of the following factors would lead to an increase in the Retained Earnings?

Answer: • Net income

Question:* Planning for future growth is called ________.

Answer: • capital budgeting

Question:* Pro forma statements are _______ statements.

Answer: • projected

Question:* Which of the following is not a fundamental of accounting?

Answer: • Magnitude

Question:* Asset Turnover is defined as ______.

Answer: • Assets/Inventory

Question:* What is the purpose of measuring liquidity?

Answer: • To measure a firm's ability to remain cash flow positive and meet its short-term obligations

Question:* Which is/are the primary financial statements used to measure solvency?

Answer: • Cash Flow Statement and Income Statement

Question:* When a company files a statement of their financial plans for the next two years with the SEC, it is called a ______.

Thursday, December 17, 2015

Financial Analysis test answers of 2016.

Question:* Return on Assets is defined as _______.

Answer: • Net Income/Total Assets

Question:* Why would a company calculate their Risk Adjusted Return on Capital?

Answer: • Gives companies the ability to allocate capital in the optimal structure

Question:* What is the purpose of measuring profitability?

Answer: • To measure a company's ability to earn a profit and continue to grow in the short-term and long-term

Question:* Operating Efficiency is defined as ______.

Answer: • Net Income/Operating Expenses

Question:* To measure a firm's solvency as completely as possible, we need to consider ______.

Answer: • the firm's capital structure and the liquidity of its current assets

Question:* How does Gross Income differ from Net Income?

Answer: • Gross Income measures profitability before operating expenses, whereas Net Income is calculated after all operating expenses

Question:* Which of the following are traded in the capital markets?

Answer: • All of the above

Question:* By doing/issuing which of the following could a company raise short-term funds by selling receivables?

Answer: • By pledging inventory

Question:* Government mandated requirements, such as installing pollution control equipment ______.

Answer: • may reduce a company's earnings but are considered a necessary social responsibility for the firm

Question:* Why do you not subtract interest expense from operating profit when calculating Return on Investment Capital?

Answer: • It is important to include interest as it is part of expenses

Question:* Which of the following is a flaw with financial analysis?

Answer: • Each company uses different formulas to calculate the ratios

Question:* What does the Price to Earnings (P/E) ratio demonstrate?

Answer: • A company's stock price relative to its earnings. Higher growth companies have higher P/E ratios

Question:* Which of the following is not a part of cost of goods sold?

Answer: • Capital

Question:* What is the purpose of measuring solvency?

Answer: • To determine a firm's ability to pay its creditors in the long term

Question:* If a company has a high P/E ratio relative to it's competitors ____.

Answer: • everyone should invest in this stock and not the competitor's

Question:* Financial managers use the _____________ to plan for monthly financing needs.

Answer: • capital budget

Question:* With which of the following regulatory bodies would a publicly traded company be much more involved than a private company would be?

Answer: • SEC

Question:* Which of the following transactions would have no impact on the stockholder's equity?

Answer: • Purchase of land from the proceeds of a bank loan

Question:* Which of the following is a flaw with financial analysis?

Answer: • Changes in accounting policy can drastically affect the results of a ratio, making comparison analysis difficult

Question:* What is historical value?

Answer: • The original cost or price paid for an asset

Question:* Which is the primary financial statement used to measure profitability?

Answer: • Balance Sheet

Question:* What is operating leverage defined as?

Answer: • Extent to which variable costs are utilized

Question:* Which report does a publicly traded company file quarterly with the SEC?

Answer: • 10Q

Question:* If a company using financing has a 60% chance of a $75,000 return under normal conditions but a 40% chance of a $20,000 return when money is tight and borrowing costs are higher, what is the expected return for this firm ?

Answer: • $53,000

Question:* What is one caveat when calculating ROA and comparing to other companies?

Answer: • Carrying value of assets may be valued differently (historical, market) by different companies

Question:* Which is/are the primary financial statements used to measure stability?

Answer: • Balance Sheet

Question:* Which ratio would you use to assess a company's ability to pay bills?

Answer: • Current ratio

Question:* In breakeven analysis, if fixed costs rise, then the breakeven point will __________.

Answer: • rise

Answer: • Firm B has a higher profit margin than firm A

Question:* In 2002, the US passed the Sarbanes-Oxley law which ____.

Answer: • was developed in response to the accounting scandals at Enron, Tyco, WorldCom and others

Question:* An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the final inventory valuation is ________.

Answer: • Weighted-average

Question:* What is financial analysis?

Answer: • Comparing ratios using numbers from the income statement and balance sheet

Question:* Which of the following equations properly represents a derivation of the fundamental accounting equation?

Answer: • Assets - liabilities = owner's equity

Question:* Accounting scandals of the past 5 years ______.

Answer: • resulted in criminal convictions of senior executives at large US corporations like Enron and WorldCom

Question:* CAPM formula calculates which of the following?

Answer: • Expected return on equity

Question:* Which of the following is an example of an area of business where use of "questionable" ethics is considered a necessity?

Answer: • None of the statements above is correct

Question:* The accounting scandals of recent years ______.

Answer: • have been dismissed as falling within the latitude of judgment for applying GAAP rules

Question:* Which ratio would you use to measure how effectively the firm uses the money shareholders have invested?

Answer: • Earnings per share

Question:* Which of the following types of firms may operate with high operating leverage?

Answer: • An auto manufacturing facility

Question:* What is meant by "the goal of the corporation is to maximize shareholder wealth"?