SOLVED

31) Early recognition of sales revenue is consistent with A) Accrual basis accounting practices B) Cash based accounting practices C) The accounting Matching Principal D) Calendar based accounting practices E) Fraudulent accounting practices 32) Which of the following may suggest that a financial statements are unreliable? A) The reported profits are far less than the operating cash flow for the period. B) The income tax expense is low compared to profits and the balance sheet shows a significant deferral. C) Inventory valuation and revenue recognition has changed significantly. D) There is an increase in Notes to the financial statements. E) Modifications in general accounting policies are similar to those adopted by a large part of the industry. 33) The reliability of liquidity ratios are significantly affected by A) Competitive environment B) Company size C) Company profitability D) Seasonality E) Age of capital assets 34) The sales revenue to capital employed ratio for Miralonge Manufacturing is 3.2. The industry benchmark is 3. One conclusion that would be consistent with the ratio, is that the company A) Has a lower book value for assets than the industry in general B) Is using its assets more efficiently than its closest competitor’s C) Has a higher operating profit than its closest competitors D) Has amortized the assets of less fully than the industry in general E) Is in a serious over trading situation 35) The impact of increasing financial leverage, all else remaining equal, is to cause A) A reduction in the return on equity B) Increases the level of risk in the company C) Increases the return on capital employed D) A commensurate increase in operating leverage E) An improvement in liquidity 36) Which Altman Z-score indicates a company will likely decare bankruptcy eventually? A) 1.50 B) 2.00 C) 2.50 D) 3.00 E) 3.50 37) Which of the following represents the most appropriate description of horizontal analysis? A) An analyst prepares pro forma financial statements for the next five years. B) An analyst compares financial ratios of a company over the last five years. C) An analyst compares financial ratios for the current year for two companies. D) An analysis prepares ratios to determine what sales are required to earn a profit. E) An analyst develops ratios to determine how much the company needs to borrow. 38) Which of the following represents the most appropriate description of vertical analysis? A) An analyst prepares pro forma financial statements for the next five years. B) An analyst compares financial ratios of a company over the last five years. C) An analyst compares financial ratios for the current year for two companies. D) An analyst prepares ratios to determine what sales are required to earn a profit. E) An analyst develops ratios to determine how much the company needs to borrow. 39) Which of the following represents the most appropriate description of breakeven analysis? A) An analyst prepares pro forma financial statements for the next five years. B) An analyst compares financial ratios of a company over the last five years. C) An analyst compares financial ratios for the current year for two companies. D) An analyst prepares ratios to determine what sales are required to earn a profit. E) An analyst develops ratios to determine how much the company needs to borrow. 40) Which of the following ratio patterns over the past five years would predict the bankruptcy of a company? A) The ratios are consistently about the same over the five years. B) The ratios start to get smaller over the five years. C) The ratios start to get larger over the five years. D) The ratios start to somewhat worse over the five years. E) The ratios start to have large changes over the five years.