Financial Statement Analysis: Applications

Financial Statement Analysis: Applications

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Question 1 of 4

1. Question
Which of the following items is least likely to be forecasted as a percentage of the forecasted sales for the year?
- Operating Expense
- Investment in working capital
- Investment in fixed capital
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Question 2 of 4

2. Question
Which of the following is least likely to improve the credit rating of a debt instrument?
- Decrease in the variability of profit margins
- Diversification of product line
- Decrease in interest coverage ratio
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Question 3 of 4

3. Question
A portfolio manager decides to select stocks with low P/E ratios only. Which of the following is least likely a limitation of the strategy?
- His portfolio will likely exclude many of the growth stocks.
- Some of the stocks have low P/E due to high leverage.
- His portfolio will likely exclude many of the income stocks.
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Question 4 of 4

4. Question
An analyst has convincing evidence to believe that WeiQ Corp has been under-reporting its earnings by lowering the salvage value of its assets to levels significantly lower than that of its peers.

What is the most appropriate action to be taken by the analyst?
- Adjust the earnings upwards to make up for the conservative bias
- Do not adjust anything as conservative bias is OK.
- Adjust the useful life to match industry norm, but do not adjust the earnings.
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