Financial Ratios 1-23-2024

FINANCIAL ACCOUNTING MCQ

Financial analysts are aware of the many limitations of ratio analysis as a technique of financial statement analysis. Describe the advantages and disadvantages of ratio analysis.  Explain ways that ratios may be misleading to an analyst. For example, ratios are retrospective and do not directly incorporate forecasts of future performance.

Which is not a potential problem of utilizing ratio analysis? A. trends and industry averages are historical in nature. B. financial data may be distorted due to price-level changes. C. firms within an industry may not use similar accounting methods. D. all of the above E. answer not given

Economic consequences of accounting standard-setting means: a.    standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard. b.    standard-setters must ensure that no new costs are incurred when a new standard is issued. c.    the objective of financial reporting should be politically motivated to ensure acceptance by the general public. d.    accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.

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Accounting  What are some common financial statement errors or discrepancies that analysts and auditors should watch out for?

Can assessment measures be used for predictive purposes? Accounting practitioners have criticized some proposed accounting standards on the grounds that they are difficult to implement because of measurement problems. They, therefore, conclude that the underlying theory is inappropriate. Assuming that the critics are correct about the implementational difficulties, do you agree with their thinking? Discuss. What type of measurement scale (nominal, ordinal, interval, or ratio scale) is being used in the following situations?   Musical scales - interval scales Insurance risk classes for automobile insurance -  Numbering of pages in a book  A grocery scale  A grocery scale deliberately set 10 pounds too high Assignment of students to advisers, based on major

Which of the following is not an advantage of accounting standards? Select one:   a. All of the given answers are correct. b. It reduces the reliability of financial statements. c. It helps to attain uniformity in accounting. d. It provides guidance on the content and presentation of financial statements.

Explain the role

A tradeoff between enhancing qualitative characteristics often occurs. For example, when a company records sales revenue, it is required to simultaneously estimate and record an expense for potential bad debts (uncollectible accounts). Including this estimated expense is considered to represent the economic event faithfully and to provide relevant information about the net profi ts for the accounting period. Th e information is timely and understandable; but because bad debts may not be known with certainty until a later period, inclusion of this estimated expense involves a sacrifi ce of verifi ability. Th e bad debt expense is simply an estimate. It is apparent that it is not always possible to simultaneously fulfi ll all qualitative characteristics. Companies are most likely to make tradeoff s between which of the following when preparing fi nancial reports? A . Relevance and materiality. B . Timeliness and verifi ability. C . Relevance and faithful representation.

If CBA Failed to meet earning expectations because Loan Impairment expense was Higher than expected, the ERC is likely to be? A. Small, as imperfections are 'fictitious accounting' B. Big, as markets dislike impairments more than other forms of expenses C. Small, because impairment represents once off expense D. Very large, because loan impressions account for a significant portion of the revenue

Much of the current thinking of accounting standard setters about measurement seems to be based on an idealized view of markets as being complete and in perfectly competitive equilibrium. In such conditions, there is a unique market price based on full information for every asset and liability, and there is an obvious attraction in using this price as the measure for accounting. This explains the apparent enthusiasm for single ideal measurement methods for all assets and liabilities.Required:Given that in reality, ideal conditions of markets are unlikely to hold, critically appraise whether a single measurement basis in financial reporting is appropriate.

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Which of the following statements is true? Select one:   1.Non-financial measures may reflect drivers of future financial performance.   2.Non-financial measures are not consistent with contemporary management accounting.   3.Non-financial measures are more difficult to action.   4.Non-financial measures are more difficult to understand.