CHAPTER 1.

OVERVIEW OF FINANCIAL STATEMENT ANALYSIS

https://quizlet.com/425511526/test

5 Written questions

1. - How easily can new firms enter a market?

- Are there entry barriers?

- Do the existing rivals have distinct competitive advantages making it difficult for other firms
to enter and compete?

INCORRECT

No answer given

THE ANSWER

Threat of New Entrants

2. the profitability of a firm for a period of time.

INCORRECT

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THE ANSWER

Income statements provide info about

3. the valuation and measurement methods used in preparing financial statements.

INCORRECT

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THE ANSWER

GAAP determines

4. - Non‐differentiated products

- Accepting a lower profit margin in return for a higher sales volume and market share

INCORRECT
 No answer given

THE ANSWER

Low‐cost leadership strategy

5. the effects of a firm's operating decisions and investing decisions.

INCORRECT

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THE ANSWER

Assets portion of the balance sheet reports

5 Matching questions
1. Common size financial statements
INCORRECT
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THE ANSWER
B. - Usually done as a percentage of revenue (IS) or assets (BS)

- Helpful in comparing different size companies in the same industry

2. Product differentiation strategy

INCORRECT

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THE ANSWER

C. - Unique products

- Achieving relatively high profit margins

3. Statement Of Cash Flows (CF) assesses

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 D. a firm's past ability to generate free cash
flows and for predicting future free cash flows.

4. Framework for Strategy Analysis

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THE ANSWER

E. - Nature of product or service

- Integration within value chain

- Geographical diversification

- Industry diversification

5. Sources of Financial Statement Information

INCORRECT

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THE ANSWER

A. - Annual Report to Shareholders

- Form 10‐K Annual Report

- Form 10‐Q Quarterly Report

- Prospectus or Registration Statement

A. - Annual Report to Shareholders

- Form 10‐K Annual Report

- Form 10‐Q Quarterly Report

- Prospectus or Registration Statement

B. - Usually done as a percentage of revenue (IS) or assets (BS)

- Helpful in comparing different size companies in the same industry

 C. - Unique products

- Achieving relatively high profit margins

D. a firm's past ability to generate free cash
flows and for predicting future free cash flows.
E. - Nature of product or service

- Integration within value chain

- Geographical diversification

- Industry diversification

5 Multiple choice questions

1. - threat of entry

- threat of substitute

- supplier power

- buyer power

- Rivalry among Existing Firms

1. No answer given
2. Porter's Five Forces

3. Income Statement (IS)

4. Tools for Studying Industry Economics

5. Statement of Cash Flows (CF)

2. - Buyer Power

- Supplier Power
1. No answer given
2. Vertical competition

3. Balance Sheet (BS)

4. Statement Of Cash Flows (CF) categories

 5. Horizontal competition
3. - Relates to leverage in negotiating input prices
from suppliers.

- If an industry has a large number of potential buyers of inputs that are produced by
relatively few suppliers, the suppliers will have greater power in setting prices and
generating profits
1. No answer given

2. Threat of Substitutes

3. Buyer Power
4. Supplier Power

5. Value Chain Analysis

4. - Dividends

- Earnings

- Cash flows

- Market
(First 3 will give same value)
1. No answer given

2. Horizontal competition

3. Product differentiation strategy

4. Balance Sheet (BS)

5. Approaches on valuing a firm
5. - Represents a point in time

- Assets = Liabilities + Owner's Equity

1. No answer given

2. GAAP determines

3. Value Chain Analysis

4. Balance Sheet (BS)
 5. Approaches on valuing a firm

5 True/False questions

1. - Operating

- Investing

- Financing → Statement Of Cash Flows (CF) categories

INCORRECT

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THE ANSWER

True

2. - Porter's Five Forces classification framework 

- Value chain analysis
- Economic Attributes Framework → Porter's Five Forces

INCORRECT

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THE ANSWER

False

It should be → Tools for Studying Industry Economics

3. - How easily can customers switch to substitute

products or services?

- How likely are they to switch?

- With close substitutes, competition increases and profitability decreases.

- Unique products with few substitutes enhance profitability. → Threat of Substitutes

INCORRECT

No answer given
 THE ANSWER

True

4. - Identify Economic Characteristics & Competitive Dynamics in the Industry

- Identify Company Strategies

- Asses the Quality of the Financial Statements

- Analyze Profitability, Growth, and Risk

- Project Future Financial Statements

- Value the Firm → Six steps of Financial Reporting, Analysis, & Valuation

INCORRECT

No answer given

THE ANSWER

True

5. - for which it has the rights to future economic benefits as a result of a past
transaction or event.

- for which the firm can predict and measure, the future benefits with a reasonable degree of
precision and reliability. → A firm can recognize as assets only those resources:

INCORRECT

No answer given

THE ANSWER

True