Question 1

The building blocks of financial statement analysis include (1)liquidity, (2)salability, (3)solvency, and (4)profitability.

Accepted Answer

The building blocks of financial statement analysis include liquidity, profitability, solvency, and efficiency. Salability is not a commonly used term in financial statement analysis.

Question 2

The building blocks of financial statement analysis include (1)liquidity, (2)solvency, (3)profitability, and (4)market prospects.

Accepted Answer

These four items are commonly used as the fundamental categories for financial statement analysis.

Question 3

The evaluation of company performance and financial condition includes evaluation of (1)past and current performance, (2)current financial position, and (3)future performance and risk.

Accepted Answer

This is a correct statement. Evaluating a company's performance and financial condition requires analyzing its past and current performance, current financial position, and future performance and risk.

Question 4

Financial reporting includes not only general purpose financial statements, but also information from SEC filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports, and Webcasts.

Accepted Answer

Financial reporting encompasses all forms of communication from a company to its stakeholders, including the various sources listed in the statement.

Question 5

External users of accounting information make the strategic and operating decisions of a company.

Accepted Answer

The answer of External users of accounting information make the...

Question 6

Financial statement analysis applies analytical tools to financial statements and related data for making business decisions.

Accepted Answer

Financial statement analysis is the process of using analytical tools to examine financial statements and other relevant data in order to make informed business decisions.

Question 7

One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.

Accepted Answer

Financial statement analysis can help internal users identify strengths and weaknesses in company performance, which can be used to make strategic decisions aimed at improving efficiency and effectiveness in delivering products and services.

Question 8

Profitability is the ability to generate positive market expectations.

Accepted Answer

The answer of Profitability is the ability to generate positive...

Question 9

Suppliers use financial statement information in establishing credit terms.

Accepted Answer

Suppliers often review a company's financial statements to assess their creditworthiness and establish credit terms, such as payment terms and credit limits. This information can help the supplier determine the level of risk involved in doing business with the company and ensure they will be paid in a timely manner.

Question 10

Evaluation of company performance does not include analysis of (1)past and current performance,
(2)current financial position, and (3)future performance and risk.

Accepted Answer

Evaluation of company performance includes analysis of past and current performance, current financial position, and future performance and risk.

Question 11

Financial analysis only refers to the communication of relevant financial information to decision makers.

Accepted Answer

The answer of Financial analysis only refers to the communication...

Question 12

The evaluation of company performance and financial condition focuses solely on past performance.

Accepted Answer

While past performance is an important factor in evaluating a company's performance and financial condition, it is not the only factor. Analysis includes other factors such as future growth potential, market trends, and competitive landscape.

Question 13

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Accepted Answer

The answer of Market prospects are the ability to provide...

Question 14

Profitability is the ability to provide financial rewards sufficient to attract and retain financing.

Accepted Answer

Profitability is a crucial factor in attracting and retaining financing, as investors and lenders want to see a return on their investment.

Question 15

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Accepted Answer

The answer of A company's board of directors analyzes financial...

Question 16

Liquidity and efficiency are the ability to meet short-term obligations and to efficiently generate revenue.

Accepted Answer

Liquidity refers to the ability of a company to meet short-term obligations, while efficiency refers to the ability of a company to generate revenue in an efficient manner. Both are important measures of a company's financial health.

Question 17

External users of accounting information manage and operate the company.

Accepted Answer

External users of accounting information are individuals or entities outside the company who rely on financial statements and reports to make decisions about their interactions with the company, such as investors, lenders, and regulators. They do not manage or operate the company. Internal users, such as managers and employees, are responsible for managing and operating the company.

Question 18

Profitability is the ability to generate future revenues and meet long-term obligations.

Accepted Answer

The answer of Profitability is the ability to generate future...

Question 19

Internal users of accounting information make the strategic and operating decisions of a company.

Accepted Answer

Internal users of accounting information such as managers, executives and employees utilize financial information for making strategic and operating decisions that affect the future of the company.

Question 20

Market prospects are the ability to generate positive market expectations.

Accepted Answer

Market prospects refer to the expected positive performance of a market, product, or company. It is the ability to generate and maintain positive market expectations, which can lead to increased demand and revenue.

Quiz 17: Analysis of Financial Statements