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Chapter15Financialstatementanalysis
MultipleChoice
Identifythechoicethatbestcompletesthestatementoranswersthequestion.

1.Howisthecommercialmargincalculated?
a. Commercialmargin=SalesofmerchandisexCostofmerchandisesold
b. Commercialmargin=Salesofmerchandise/Costofmerchandisesold
c. Commercialmargin=SalesofmerchandiseCostofmerchandisesold
d. Commercialmargin=Costofmerchandisesold/Salesofmerchandise
ANSWER:C
Moderate
POINTS: 0/1
REF:
page543

2.WhatdoesEBITDAmean?
a. Earningsbeforeincometax,depletionandamortization
b. Exceptionalbetweenincometax,depreciationandamortization
c. Earningsbeforeinterests,taxes,depreciationandamortization
d. Earningsbeforeinterests,taxesanddepreciationofassets
ANSWER:C
Easy
POINTS: 0/1
REF:
page543

3.Whichratiocanbeusedtomeasurethevulnerabilityofafirmtoatakeover?
a. Netmarketvalueofequity/EBITDA
b. Netincome/EBITDA
c. Totalassets/EBITDA
d. Longtermliabilities/EBITDA
ANSWER:A
Moderate
POINTS: 0/1
REF:
page544

4.Howistheworkingcapitalcalculated?
a. Workingcapital=ShareholdersequityandlongtermdebtsFixedassets
b. Workingcapital=FixedassetsCurrentassets
c. Workingcapital=Shareholdersequityandlongtermdebts+Fixedassets
d. Workingcapital=Fixedassets+Currentassets
ANSWER:A
Moderate
POINTS: 0/1
REF:
page551

5.Whichofthefollowingequationsiscorrect?

a.
b.
c.
d.

WorkingcapitalWorkingcapitalneed=Netcash
Workingcapital/Workingcapitalneed=Netcash
Workingcapital+Workingcapitalneed=Netcash
WorkingcapitalxWorkingcapitalneed=Netcash

ANSWER:A
Moderate
POINTS: 0/1
REF:
page552

6.Whichofthefollowingtypesoffinancialstructurecorrespondsgenerallytoa
manufacturingcompanywithanegativenetcash?
(Note:WC=Workingcapital,WCN=Workingcapitalneed,NC=Netcash)
a. WCN
WC
NC
b. WCN
WC
NC
c. NC
WC
WCN
d. WC
NC
WCN
ANSWER:D
Moderate
POINTS: 0/1
REF:
page555,556

7.Howistheinterestcoverageratiocalculated?
a. Interestcoverageratio=Operatingincome(beforeinterestexpenseandincome
taxes)/Interestexpense
b. Interestcoverageratio=Netincome/Interestexpense
c. Interestcoverageratio=Shareholdersequity/Interestexpense
d. Interestcoverageratio=Longtermdebts/Interestexpense
ANSWER:A
Moderate
POINTS: 0/1
REF:
page562

8.Whatiscalculatedbythefollowingformula:(Netprofitorlossfortheperiod
attributabletoordinaryshareholders)/(Timeweightedaveragenumberofordinary
sharesoutstandingduringtheperiod)?
a. Basicearningspershare.
b. Dilutedearningspershare.
c. Adjustedbasicearningspershare.

d. Adjusteddilutedearningspershare.
ANSWER:A
POINTS: 0/1
REF:
page568

9.AccordingtoIAS14,abusinesssegmentisadistinguishablecomponentofanentity
thatisengagedinprovidinganindividualproductorserviceoragroupofrelated
productsorservicesandthatissubjecttorisksandreturnsthataredifferentfromthose
ofotherbusinesssegments.
a. True
b. False
ANSWER:A
Moderate
POINTS: 0/1
REF:
page576

10.Whichtypeofaccountsmanipulationmainlyconsistsinareductionofthevarianceof
theprofit?
a. Creativeaccounting.
b. Bigbathaccounting.
c. Incomesmoothing.
d. Earningsmanagement.
ANSWER:C
Moderate
POINTS: 0/1
REF:
page580