Financial Statement Analysis Chapter Overview

BAB 1 OVERVIEW OF FINANCIAL STATEMENT ANALYSIS
Multiple Choice
1. Business analysis is applied in many forms and is an important part of the decision of down
below, except
a. Security analysis
b. Investment advisors
c. Politicians
d. Investment bankers
ANS: C REF: Subramanyam Edisi 11 halaman 9
2. The most popular and widely used tools of financial analysis is

a. Ratio analysis
b. Cash flow analysis
c. Credit analysis
d. Environmental analysis
ANS: A REF: Subramanyam Edisi 11 halaman 34
3. Estimating the intrinsic value of a company or its stock called as

a. Valuation
b. Debt
c. Allowance
d. Credit
4. a process of evaluating the extent to which a companys accounting reflects economic reality.
This is done by studying a companys transactions and events, assessing the effects of its
accounting policies on financial statements, and adjusting the statements to both better
reflect the underlying economics and make them more amenable to analysis called as
a. Accounting analysis
c. Credit analysis
5. The evaluation of both a companys business decisions and its success at establishing a
competitive advantage. This includes assessing a companys expected strategic responses to
its business environment and the impact of these responses on its future success and growth
called as
a. Strategy analysis
c. Credit analysis
.
True/False
1. The basis of valuation is present value theory.
ANS: T REF: Subramanyam Edisi 11 halaman 40
2. Analysis of financial statements can provide managers with clues to strategic changes in
operating, investing, and financing activities. Managers also analyze the businesses and financial
statements of competing companies to evaluate a competitors profitability and risk.
3. The uncertainty in financial statement analysis due to accounting distortions. A major goal of
accounting analysis is to evaluate and reduce accounting risk and to improve the economic
content of financial statements, including their comparability called Accounting risk
4. Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds. Cash
flow analysis provides insights into how a company is obtaining its financing and deploying its
resources.
5. 95% of the 250 largest global companies produce corporate responsibility reports.
Matching
1. The evaluation of both a companys business decisions and its success at establishing a
competitive advantage.
ANS: Strategy Analysis REF: Subramanyam Edisi 11 halaman 10
2. The uncertainty in financial statement analysis due to accounting distortions.
ANS: Accounting Risk REF: Subramanyam Edisi 11 halaman 14
3. Estimating the intrinsic value of a company or its stock called as
Pilihan : Debt or Valuation
ANS: Valuation REF: Subramanyam Edisi 11 halaman 40

BAB 2 FINANCIAL REPORTING AND ANALYSIS
Multiple Choice
1. Information intermediaries create value by processing and synthesizing raw and diverse
information about a company and output it in a form useful for business decisions. They are
viewed as performing one or more of at least four functions, except
a. Information gathering
b. Information interpretation
c. Perspective analysis
d. Recommendation
2. Financial statements are prepared periodically, typically each quarter. However, alternative
information sources, including analysts reports, are released to the market whenever business
events demand their revision. Limitations of financial statement information refers to
a. Timeliness
b. Frequency
c. Relevant
d. Forward-looking
3. The superiority of accruals in providing relevant information about a companys financial
performance and condition, and for predicting future cash flows, is explained as follows except
a. Predicting future cash flows
b. Financial performance
c. Financial condition
d. Evaluating manager performance
ANS: D REF: Subramanyam Edisi 11 halaman 85
4. Some reasons accounting income differs from economic income, except
a. Alternative income concepts
b. Transaction basis
c. Fair Value
d. Conservatism
5. Accounting income as consisting of three components, except
a. Nonpermanent component
b. Permanent component
c. Transitory component
d. Value irrelevant component
True/False
1. Information in financial statements is judged relative to (1) the information needs of financial
statement users and (2) alternative sources of information such as economic and industry data,
analyst reports, and voluntary disclosures by managers.
2. The magnitude of an omission or misstatement of accounting information that, in the light of
surrounding circumstances, makes it possible that the judgment of a reasonable person relying
on the information would be changed or influenced by the omission or misstatement means
materiality.
3. At revenue recognition, revenues are realizable when the company receives an asset for
products or services delivered (often receivables) that is convertible to cash and revenues are
realized when cash is acquired for products or services delivered.
ANS: F REF: Subramanyam Edisi 11 halaman 83
4. It is impossible to consistently manage income upward in the long run and all income is
manipulated.
5. Under fair value model, asset and liability values are largely determined by a business entitys
actual transactions in the past; the valuation need not reflect current economic circumstances.
In contrast, under the historical cost accounting, asset or liability amounts are determined by the
most current value using market assumptions; the valuation need not be based on an actual
transaction.
Matching
1. For information to be reliable it must be verifiable, representationally faithful, and neutral. the
information reflects reality means
ANS: Representational faithfulness REF: Subramanyam Edisi 11 halaman 75
2. All product costs remain on the balance sheet as inventory until the products are sold, at which
time they are transferred into the income statement as
ANS: Cost Of Goods Sold (COGS) REF: Subramanyam Edisi 11 halaman 83
3. Financial statements are prepared as often as every quarter and are typically released from
three to six weeks after the quarter-end.
Pilihan : Timeliness or Frequency
ANS: Timeliness REF: Subramanyam Edisi 11 halaman 79
BAB 5 ANALYZING INVESTING ACTIVITIES: INTERCORPORATE INVESTMENTS
Multiple Choice
1. Debt (or noninfluential equity) securities purchased with the intent of actively managing them
and selling them for profit in the near future is...
a. Available-for-Sale Securities
b. Trading Securities
c. Equity Securities
d. Held-to-maturity securities
ANS: B REF: Subramanyam Edisi 11 halaman 277
2. Business combinations with sound economic motivations have a long history. Among the
economic reasons for business combinations, except
a. acquiring valuable sources of materials, productive facilities, technology, marketing channels,
or market share.
b. securing financial resources or access to them.
c. encouraging specialization
d. acquiring tax advantages.
3. SFAS 141 requires companies to identify and value specific categories of intangible assets.
These include the following, except
a. Competition agreements.
b. Trademarks and other marketing-related assets.
c. Intangible assets relating to contractual relationships such as licensing, royalty, advertising,
and management contracts, lease or franchise agreements, broadcast rights, employment
contracts, and the like.
d. Patents, computer software, databases, trade secrets or formulae, and other technology based
intangible assets.
4. There are a number of important points relating to equity method accounting, except
a. Investment earnings (the proportionate share of the earnings of the investee company) should
be distinguished from core operating earnings in the analysis of the earnings of the investor
company unless the investment is deemed to be strategic in nature.
b. Contrary to the reporting of available-for-sale and trading securities discussed earlier in this
chapter, investments accounted for under the equity method are reported at adjusted cost, not
at market value.
c. An investor should continue equity method accounting when the investment is reduced to zero
(such as due to investee losses) and should not provide for additional losses unless the investor
has guaranteed the obligations of the investee or it otherwise committed to providing further
financial support to the investee.
d. The investment account is reported at an amount equal to the proportionate share of the
stockholders equity of the investee company.
5. Disregarding the parents potential tax liability from remittance of earnings by an affiliate,
the dollar-for-dollar equivalence of earnings cannot be taken for granted. Reasons include,
except
a. A regulatory authority can sometimes intervene in a subsidiarys dividend policy.
b. A subsidiary can operate in a country where restrictions exist on remittance of earnings or
where the value of currency can deteriorate rapidly. Political risks can further inhibit access to
earnings.
c. Dividend restrictions in loan agreements can limit earnings accessibility.
d. Presence of a stable or powerful mayority interest can reduce a parents discretion in setting
dividend or other policies.
ANS: D REF: Subramanyam Edisi 11 halaman 287
True/False
1. Income statement for Available-for-Sale Securities, unrealized gains/losses not recognized in
either net income or comprehensive income.
2. The equity method requires investors initially to record investments at cost and later adjust
the account for the investors proportionate share in both the investees income (or loss) because
acquisition and decreases from any dividends received from the investee.
3. Consolidated financial statements report the results of operations and financial condition of a
parent corporation and its subsidiaries in one set of statements.
4. Only after the purchase price has been allocated to the fair market value of all tangible and
identifiable intangible assets, less the market value of all liabilities assumed, can any of the
purchase price be assigned to goodwill.
5. Accounting definition of goodwill. Goodwill is the excess of cost over fair market value of net
assets acquired in a purchase transaction. No attempt is made to explicitly identify components
of this asset or the economic values assigned to them.
Matching
1. An agreement between two or more parties to exchange future cash flows. It is common for
hedging risks, especially interest rate and foreign currency risks.
ANS: Swap contract REF: Subramanyam Edisi 11 halaman 300
2. An agreement between two or more parties to purchase or sell a certain commodity or
financial asset at a future date (called settlement date) and at a definite price.
ANS: Futures contract REF: Subramanyam Edisi 11 halaman 300
BAB 6 ANALYZING OPERATING ACTIVITIES
Multiple Choice
1. An estimate of the stable average income that a business is expected to earn over its lifetime,
given the current state is..
a. Permanent Income
b. Permanent Component
c. Transitory Component
d. Core Income
2. measure of company income as generated from operating activities is..
a. Non-operating Income
b. Operating Income
c. Net Income
d. Alternative Income
ANS: B REF: Subramanyam Edisi 11 halaman 362
3. Earnings management with special charges except..
a. Special charges often garner less investor attention under an assumption they are non-
recurring and do not persist.
b. Managers motivated to re-classify operating charges as special one-time charges
c. when analyst ignore such re-classified charges it leads to low operating expense estimates
and overestimates of company value.
d. none of the above
ANS: D REF: Subramanyam edisi 11 halaman 374
4. what is definition of Out-of-the-Money..
a. When Stock price is higher than exercise price
b. Equal to stock price on grant date
c. When stock price is less than exercise price
d. The price a holder has the right to purchase shares at
ANS: C REF: Subramanyam edisi 11 halaman 380
5. What is definition of In-the-Money..
a. When Stock price is higher than exercise price
b. Equal to stock price on grant date
c. When stock price is less than exercise price
d. The price a holder has the right to purchase shares at
ANS: A REF: Subramanyam edisi 11 halaman 380
True/False
1. ESOs in-the-money are dilutive securities and affect diluted EPS.
ANS: T REF: Subramanyam edisi 11 halaman 388
2. ESOs out-of-the-money are antidilutive securuties and do not affect diluted EPS.
3. Interest rate is determined by interest rate, principal, and time.
ANS: F REF: Subramanyam edisi 11 halaman 389
4. Interest Expense is determined by risk characteristics of borrower
ANS: F REF: Subramanayam edisi 11 halaman 389
5. Exercise price often set equal to stock price on grant date.
Matching
1. Cost usually related to major changes in company business.
ANS: Restructuring Charges REF: Subramanyam edisi 11 halaman 365
2. When asset fair value is below carrying (book) value.
ANS: Asset Impairment REF: Subramanyam edisi 11 halaman 366
3. transactions and events that are unusual or infrequent.
ANS: Special Items REF: Subramanyam edisi 11 halaman 357
4. involves change in estimate underlying accounting.
ANS: Accounting Estimate Change REF: Subramanyam edisi 11 halaman 355
5. a change is accounted for in current and future periods
ANS: Prospective Application REF: Subramanyam edisi 11 halaman 354

Financial Statement Analysis Chapter Overview

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BAB 1 OVERVIEW OF FINANCIAL STATEMENT ANALYSIS

2. The most popular and widely used tools of financial analysis is

3. Estimating the intrinsic value of a company or its stock called as

Pilihan : Debt or Valuation

ANS: Valuation REF: Subramanyam Edisi 11 halaman 40

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