Financial Statement Analysis, Planning, and Growth
Multiple Choice Questions:
c 1. One key reason a long-term financial plan is developed is because:
a. the plan determines your financial policy.
b. the plan determines your investment policy.
c. there are direct connections between achievable corporate growth and the financial policy.
d. there is unlimited growth possible in a well-developed financial plan.
e. None of the above.
PRO FORMA STATEMENTS
b 2. Projected future financial statements are called:
a. plug statements.
b. pro forma statements.
c. reconciled statements.
d. aggregated statements.
e. none of the above.
PERCENTAGE OF SALES
e 3. The percentage of sales method:
a. requires that all accounts grow at the same rate.
b. separates accounts that vary with sales and those that do not vary with sales.
c. allows the analyst to calculate how much financing the firm will need to support the predicted sales level.
d. Both A and B.
e. Both B and C.
e 4. A _____ standardizes items on the e statement and balance sheet as a percentage of total sales and total assets, respectively.
a. tax reconciliation statement
b. statement of standardization
c. statement of cash flows
d. common-base year statement
e. common-size statement
a 5. Relationships determined from a firm’s financial information and used parison purposes are known as:
a. financial ratios.
b. comparison statements.
c. dimensional analysis.
d. scenario analysis.
e. solvency analysis.
SHORT-TERM SOLVENCY RATIOS
c 6. Financial ratios that measure a firm’s ability to pay its bills over the short run without undue stress are known as _____ ratios.
a. asset management
b. long-term solvency
c. short-term solvency
e. market value
b 7. The current ratio is measured as:
a. current assets minus current liabilities