Question 1

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

Accepted Answer

Porter's five forces include Buyer Power, Supplier power, Threat of New Entrants, Threat of Substitutes, and Competitive Rivalry. Threat of Regulation is not one of the five forces.

Question 2

Which of the following is not an activity reported in the cash flows financial statement?
A) operating
B) investing
C) manufacturing
D) financing

Accepted Answer

The manufacturing activity is not reported in the cash flows financial statement. The statement reports cash inflows and outflows related to operating, investing, and financing activities.

Question 3

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

Accepted Answer

C

Question 4

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

Accepted Answer

The accrual basis of accounting recognizes revenue when all or a substantial portion is performed, not necessarily when cash is received. It also recognizes expenses when incurred, not just when paid. Option A is incorrect because revenue is recognized when earned, not just when cash is received. Option B is incorrect for the same reason. Option D is incorrect because revenue is recognized when earned or performed, not just when contracts are signed.

Question 5

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.

Accepted Answer

A value chain for an industry outlines the sequence of activities involved in the creation, manufacture, and distribution of its products. It shows the steps that are taken from the raw materials stage to the point where the final product is delivered to customers. It is a way of analyzing a company's competitive position and identifying opportunities for cost savings and differentiation. It does not indicate the layers of management needed or research and development activities, nor does it determine whether the industry is horizontally or vertically integrated.

Question 6

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.
C) High profit margins.
D) Low capital intensity.

Accepted Answer

The answer of Which of the following economic characteristics is...

Question 7

On a common size basis, which of the following assets is normally largest for a electric utility?
A) Accounts receivable
B) Inventory
C) Property, Plant and Equipment
D) Cash and Marketable Securities

Accepted Answer

Property, Plant and Equipment is typically the largest asset on the balance sheet of an electric utility. This is because electric utilities require significant capital investments in infrastructure to generate, transmit, and distribute electricity.

Question 8

The accrual 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.
D) The method that matches incurred expenses with related revenues when they are earned.

Accepted Answer

The accrual basis method of accounting recognizes revenue when it is earned, and matches incurred expenses with related revenues. This is different from the cash basis method, which only recognizes revenue when cash is received and expenses when cash is paid. The accrual basis method ensures that financial statements accurately reflect the economic activity of a business.

Question 9

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

Accepted Answer

The answer of Which of the following assets would appear...

Question 10

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?

Accepted Answer

When assessing the quality of a firm's financial statements, an analyst should ask if the earnings include revenues that appear mismatched with the business model employed by the firm. This helps to identify any potential accounting irregularities or errors. The other options are not relevant to assessing the quality of financial statements.

Question 11

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?

Accepted Answer

An analyst would want to know if the earnings include nonrecurring gains or losses because they can distort the true profitability of the company. This information can help the analyst determine the overall quality of the financial statements.

Question 12

An example of an intangible asset is
A) a patent
B) land
C) investment in another company
D) raw material inventory

Accepted Answer

Intangible assets are assets that have no physical substance but still have value, such as patents, trademarks, copyrights, and goodwill. Land, investment in another company, and raw material inventory are all tangible assets.

Question 13

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.

Accepted Answer

Pharmaceutical companies require high levels of research and development to develop new drugs and treatments. This leads to high costs and often high profit margins. Barriers to entry can be high due to the need for extensive research and regulatory approvals, and there may also be significant business risk involved in bringing a new drug to market.

Question 14

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

Accepted Answer

The answer of On a common size basis, which of...

Question 15

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.

Accepted Answer

Commercial banks typically earn a low profit margin on their lending activities, as they compete on interest rates and loan terms to attract borrowers. Generally, commercial banks have higher barriers to entry and do not invest heavily in research and development like technology companies. While some commercial banks do offer fee-based financial services such as merger consulting, these services typically have higher profit margins than lending activities.

Question 16

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

Accepted Answer

A labor contract is not a current obligation that will require the outflow of resources or funds in the future, so it would not be recorded as a liability on the balance sheet. The other options (B, C, and D) are all examples of current obligations that will require payment in the future and would be recorded as liabilities on the balance sheet.

Question 17

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

Accepted Answer

Grocery store chains typically face extensive competition from other grocery store chains, as well as smaller independent stores, which drives prices down and creates a need for efficient operations. While grocery stores can have differentiated products (such as their own store-brand items), this is not unique to the industry. Net income to sales can vary depending on factors such as pricing strategy, overhead costs, and inventory management, so it is not necessarily a consistent characteristic.

Question 18

The tools for studying industry economics do not include
A) Value chain analysis
B) Classification using Porter's five forces
C) Classification of cash flows
D) Economic attributes framework

Accepted Answer

Classification of cash flows is not a tool for studying industry economics. It is more related to financial analysis and accounting. The other options, such as value chain analysis, classification using Porter's five forces, and economic attributes framework, are commonly used tools for analyzing industry economics.

Question 19

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?

Accepted Answer

The answer of When attempting to identify the economic characteristics...

Question 20

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?

Accepted Answer

Understanding the company's degree of geographical diversification can help the analyst determine how spread out the company's revenue sources are and how the company's operations may be impacted by different regions or countries. This can provide insight into the company's overall strategy. The other options listed are important considerations in financial statement analysis, but are not specifically related to strategy analysis.

Quiz 1: Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Which of the following is not one of Porter's five forces?

Which of the following is not an activity reported in the cash flows financial statement?

When assessing buyer power using Porter's five forces which of the following is not consistent with low buyer power?

The accrual basis of accounting recognizes

A value chain for an industry sets forth

Which of the following economic characteristics is consistent with a grocery store chain?

On a common size basis, which of the following assets is normally largest for a electric utility?

The accrual basis method of accounting can be best described as:

Which of the following assets would appear on the balance sheet at an amount greatly below its fair market value?

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?

Which of the following is a question an analyst would ask when assessing the quality of a firm's financial statements?

An example of an intangible asset is

Which of the following economic characteristics is consistent with a pharmaceutical company?

On a common size basis, which of the following assets is normally largest for a commercial bank?

Which of the following economic characteristics is consistent with a commercial bank?

Which of the following would not appear as a liability on the balance sheet?

Which of the following economic characteristics is consistent with a grocery store chain?

The tools for studying industry economics do not include

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?

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?