Financial Analysis

First statement: It is preferable to use audited financial statements for ratio
analysis.
Second statement: The most informative approach to ratio analysis combines
cross-sectional and time-series analyses.
Select one:
a.
Only first statement is true
b.
Only second statement is true
c.
Both statements are false
d.
Both statements are true
According to Dr. Dubos J. Masson, to effectively analyze the financial statements

of a firm, it requires an understanding of three key areas, except
Select one:
a.
The structure of the financial statements
b.
The strategies the firm pursues to differentiate itself from its competitors.
c.
Projected financial statements
d.
The economic characteristics of the industry in which the firm operates
Financial statements presenting financial data for two or more periods are called
Select one:
a.
audited financial statements
b.
Annual financial statements
c.
Interim financial statements
d.
Comparative financial statements
In this financial statement analysis, trend percentages are computed by taking a
base year and assigning its figures as a value of 100.
Select one:
a.
Ratio analysis
b.
Dupont analysis
c.
Trend analysis
d.
Vertical analysis
Financial statement analysis is used by this interested party to evaluate the
attractiveness of the investment in the business.
Select one:
a.
management
b.
creditors
c.
shareholders
d.
prospective investors
It involves the conversion of items appearing in financial statement columns into
terms of percentages of a base figure to show the relative significance of the
items to facilitate comparison.The percentage is computed by using this
formula:
Percentage of base = Amount of individual item x 100
Amount of base
Select one:
a.
Horizontal analysis
b.
Ratio analysis
c.
Vertical analysis
d.
Trend analysis
The following are the categories of financial ratios, except

Select one:
a.
liquidity ratios
b.
activity ratios
c.
market ratios
d.
cash ratios?
They use financial statement analysis to ensure the compliance of publicly
traded companies to various rules and regulations.
Select one:
a.
regulatory authorities
b.
shareholders
c.
management
d.
Creditor
First statement: Liquidity, activity and debt ratios primarily measure return.
Second statement: Market ratios capture both risk and return.
Select one:
a.
b.
c.
d.
It involves methods of calculating and interpreting financial ratios to analyze
and monitor the firm's performance.
Select one:
a.
cross-sectional analysis
b.
financial ratio
c.
financial analysisXXXX
d.
ratio analysis
They are concerned with the company’s ability to pay interest and principal
when due and are concerned with the company’s cash flow ability.
Select one:
a.
shareholders
b.
creditors
c.
management
d.
The comparison of different firm's financial ratios at the same point in time is
known as
Select one:
a.
Combined analysis
b.
ratio analysis
c.
Cross-sectional analysis
d.
Time-series analysis
Interested parties use ratio analysis to find information about the following:
I. Profitability of the business firm/
II. The firm’s ability to meet its obligations
III. Safety of the investment in the business
IV. Effectiveness of management in running the firm
Select one:
a.
I, II, III, & IV
b.
I & III
c.
I & II
d.
I, II, & III
First statement: A single ratio is already enough in providing sufficient
information to judge the overall performance of the firm.
Second statement: Additional analysis is no longer needed for the ratios that
reveal large deviations from the norm that merely indicate symptoms of a
problem.
Select one:
a.
b.
c.
Both statements are false?
d.
They are interested to know company’s ability to pay dividend, and growth of
dividends and maximize their wealth.
Select one:
a.
b.
management
c.
shareholders
d.
creditors
They usually use financial statement analysis to analyze the efficiency of
operations and make important business decisions.
Select one:
a.
b.
creditors
c.
shareholders
d.
management
When a firm compare its ratio values to those of a key competitor or group of
competitors, this analysis is known as
Select one:
a.
Combined analysis
b.
financial analysis
c.
Benchmarking
d.
Ratio analysis
This involves comparison of current to past performance, using ratios, enables
analysts to assess the firm's progress.
Select one:
a.
b.
Ratio analysis
c.
d.
Financial analysis
The assessment and evaluation of the firm's past performance, present
condition, and future business potential is generally known as
Select one:
a.
Financial statement analysis
b.
c.
Ratio analysis
d.
Financial ratio
The analytical tools used in financial statement analysis are
I. Comparative financial statements such as horizontal and vertical analysis
II. Technical analysis
III. Common-size financial statements
IV. Trend analysis
V. Fundamental analysis
VI. Ratio analysis
Select one:
a.
I, III, V, VI
b.
I, II, III, IV, V, VI
c.
I, II & III
d.
I, III, IV, VI
QUIZ 2
This ratio of analytical measurement measures the productivity of assets
regardless of capital structures.
Select one:
a.
Debt ratio
b.
Current ratio
c.
Return on total assets?
d.
Quick ratio
First statement: If the firm extended 45-day credit term and their average
collection period is 40 days may indicate a poorly managed credit collection
department.
Second statement: In times interest earned ratio, the higher its value, the
better for the firm to fulfill its interest obligations.
Select one:
a.
Only second statement is true?
b.
c.
d.
This measures the efficiency with which the firm uses all its assets to generate
sales.
Select one:
a.
debt-to-equity ratio
b.
inventory turnover
c.
total asset turnover
d.
asset-to-equity ratio
A measure of the company’s long-term debt paying ability is
Select one:
a.
Return on assets????????????????XXXXXXXXXXX
b.
Dividend payoutxxxxxxxxxxxxxx
c.
Length of the operating cycle
d.
Times interest earned
Southern Division reported the following results for 2019
Annual sales P 5,000,000
Net earnings 800,000
Investment 2,500,000
What is Southern Division’s return on investment?
Select one:
a.
32%
b.
16%xxxxxxxxxxxxxxx
c.
24%xxxxxxxxxxxxxxxx
d.
10%XXXXXXXXXXXXXXX
Selected information from the operating records of Kaya Company is as follows:
Net sales P 1,800,000
Cost of goods sold for 2019 1,200,000
Inventory at 12/31/2018 360,000
Inventory at 12/31/2019 312,000
Kay’s inventory turnover for 2019 is
Select one:
a.
3.57 timesxxxxxxxxxxxxxxx
b.
3.57 times
c.
5.36 times???xxxxxxxxxxxxxxx
d.
3.85 timesXXXXXXXXXXXXXX
Below shows the current assets and current liabilities of Tala Company
ASSETS LIABILITIES
Current Assets Current Liabilities
Cash P 2,550,000 Accounts payable
P 9,500,000
Marketable securities 2,000,000 Short-term bank loan
11,375,000
Accounts receivable 16,675,000 Total current liabilities
P 20,875,000
Inventories 26,470,000
Total current assets P 47,695,000
What is the company's quick ratio?
Select one:
a.
1.50
b.
1.20
c.
2.10
d.
1.02
First statement: If inventory is liquid, the quick ratio is the preferred measure
of overall liquidity.
Second statement: The quick ratio provides better measure of liquidity only
when a firm's inventory cannot be easily converted into cash.
Select one:
a.
b.
Only first statement is truexxxxxxxxxxxxxxxxxxx
c.
Both statements are truexxxxxxxxxxxxxxxxxxxxxx
d.
Both statements are falsexxxxxxxxxxxxxxxxxxxx
What is the Southern Division’s return on sales
Select one:
a.
16%?:?????
b.
20%xxxxxxxxxxxxxx
c.
32%
d.
25%
What is Southern Division’s asset turnover?
Select one:
a.
1 to 1xxxxxxxxxxxxxxx
b.
2 to 1
c.
3.125 to 1
d.
0.5 to 1xxxxxxxxxxxxxxxxxxxxxxxxxxxx
Lucena Corporation’s books disclosed the following information as of and for the
year ended December 31, 2019:
Net credit sales P 4,000,000
Net cash sales 1,000,000
Merchandise purchases 2,000,000
Inventory at beginning 1,200,000
Inventory at end 400,000
Accounts receivable at beginning 600,000
Accounts receivable at end 1,400,000
Net income 200,000
Marble’s percent of net income on sales is
Select one:
a.
9%
b.
56%
c.
4%
d.
44%
If a company has P 10 million net income and 4 million outstanding shares, the
earnings per share would be
Select one:
a.
P 10.00
b.
P 40.00
c.
P 0.40
d.
P 2.50
First statement: A lower times interest earned ratio indicates greater capacity
to meet scheduled payments.
Second statement: Liquidity refers to the company’s ability to pay its long-
term liabilities as they fall due.
Select one:
a.
Only second statement is truexxxxxxxxxxxxxxxxx
b.
c.
Both statements are true??????????????xxxxxxxxxxxxxxx
d.
Both statements are falsexxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Which of the following statements is incorrect?
Select one:
a.
It is appropriate to compare a company’s current financial ratio with same
financial ratio for (1) the company is prior years and/or (2) the ratio for the
industry in which the company is affiliated. ??????
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
b.
Profitability evaluation ratios have a higher power than solvency determination
ratios predicting for performance for both income and solvency.
c.
Companies where product costs present a high percentage of total costs could
be expected to have a low gross profit percentage.???????xxxxxxxxxxxxxx
d.
Gross profit percentages do not vary a great deal among industries.
The most commonly cited financial ratio that measures the firm's ability to
measure its short-term obligations is
Select one:
a.
b.
inventory turnover
c.
current ratio
d.
debt ratio
The following are debt ratios except
Select one:
a.
b.
equity multiplier
c.
times interest earned
d.
inventory turnove
Amy Corporation’s stockholders’ equity at December 31, 2019, consisted of the
following:
Preferred stock, P 50 par value, 10% noncumulative;
100,000 shares issued and outstanding P 5,000,000
Common stock, P 10 par value, 800,000 shares
Issued and outstanding 8,000,000
Retained earnings 3,000,000
The preferred stock has a liquidating value of P 55 per share. At December
31,2019 the book value per share of common stock is
Select one:
a.
P 10?????xxxxxxxxxxxxxxxxxxxxxxxxxxxx
b.
P 13.75
c.
P 14.38
d.
P 13.13
The magnification of risk and return through the use of fixed cost financing, such
as debt and preferred stock is called
Select one:
a.
financial leverage
b.
profitability
c.
solvency
d.
liquidity
Below shows the current assets and current liabilities of Tala Company
ASSETS LIABILITIES
Current Assets Current Liabilities
Cash P 2,550,000 Accounts payable
P 9,500,000
Marketable securities 2,000,000 Short-term bank loan
11,375,000
Accounts receivable 16,675,000 Total current liabilities
P 20,875,000
Inventories 26,470,000
Total current assets P 47,695,000
Tala’s current ratio is
Select one:
a.
5.75??????????????xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
b.
2.75xxxxxxxxxxxxxxxxxxx
c.
2.28
d.
2.50
This commonly measures the activity, or liquidity of a firm's inventory
Select one:
a.
average collection period
b.
total asset turnover
c.
inventory turnover
d.
average payment period
Select one:
a.
Ratio analysis
b.
Time-series analysis???????????
c.
d.
Combined analysis
Net profit margin measures
Select one:
a.
all costs and expenses are deducted
b.
all costs and expenses including interest and taxes are deducted.
c.
all costs and expenses, including interest, taxes, and preferred stock dividends
have been deducted
d.
all costs and expenses other than interest, taxes, and preferred stock dividends
are deducted.
A higher times interest ratio indicates greater capacity to meet scheduled
payments.
Select one:
True
False
The most informative approach to ratio analysis combines cross-sectional and
time series analyses.
Select one:
True
False
It's not good for the company to have higher gross profit margin.
Select one:
True
False???
When the firm earns a profit even after making interest payments to creditors
and paying dividends to preferred stockholders, the firm's use of leverage
magnifies the return earned by common stockholders.
Select one:
True
False
A firm's market value per share of P 3.50 means that the investors are paying P
3.50 for each P 1.00 of the firm's stock.
Select one:
True???
False
The debt ratio of 35 percent indicates that the company has financed more than
half of its assets with debt.
Select one:
True
False????
This is commonly cited measure of the firm's success with respect to the
earnings on sales.
Select one:
a.
Margin of error
b.
Net profit margin
c.
Operating margin
d.
Gross profit margin
If the firm extended 45-day credit term and their average collection period is 40
days, may indicate a poorly managed credit collection department.
Select one:
True
False
Return on assets often called
Select one:
a.
Return on Common Equity
b.
Total asset turnover
c.
Inventory turnover
d.
Return on Investment
It is preferable to use audited financial statements for ratio analysis.
Select one:
True
False
A single ratio is already enough to provide sufficient information to judge the
overall performance of the firm.
Select one:
True
False
The average collection period is meaningful only in relation to the firm's credit
term.
Select one:
True
False
Liquidity, activity and debt ratios primarily measure return.
Select one:
True
False
This measures the percentage of each sales dollar remaining after the firm has
paid for its goods.
Select one:
a.
operating profit margin
b.
net profit margin
c.
gross profit margin
d.
earnings per share
This refers to the number of pesos earned during the period in behalf of each
outstanding share of common stock.
Select one:
a.
Market ratio
b.
Book value per share
c.
Earnings per share
d.
Price/earnings rati
Earnings per share is the peso amount earned on behalf of each share
outstanding.
Select one:
True
False
The ratio that measures the proportion of total assets financed by the creditors
Select one:
a.
Market ratios
b.
Liquidity ratios
c.
Debt ratios
d.
Profitability ratios
The 10 percent return on assets indicates that that company earned 10
centavos on each peso of asset invested.
Select one:
True
False
In times interest earned ratio, the higher its value, the better for the firm to
fulfill its interest obligations.
Select one:
True
False
These ratios give insight into how well investors in the market place feel the firm is doing in
terms of risk and return.
Select one:
a.
Profitability ratios
b.
Market ratios
c.
Liquidity ratios
d.
Debt ratios
The average sales per day equals annual sales divided by twelve months.
Select one:
True
False
To compute for debt ratio, you have to divide current assets by current liabilities.
Select one:
True
False
If the inventory is liquid, the quick ratio is the preferred measure of overall
liquidity.
Select one:
True
False
In this kind financial statement analysis, trend percentages are computed by
taking a base year and assigning its figures as a value of 100.
Select one:
a.
Ratio analysis
b.
Dupont analysis
c.
Trend analysis
d.
Vertical analysis
Provides an assessment of how investors view firm's performance
Select one:
a.
Earnings per share
b.
Market ratio
c.
Price/earnings ratio
d.
This is commonly used to assess the owner's appraisal of share value.
Select one:
a.
Earnings per share
b.
Price/earnings ratio
c.
d.
Market ratio
A lower times interest earned ratio indicates greater capacity to meet scheduled
payments.
Select one:
True
False
This commonly measures the activity, or liquidity of the firm's inventory
Select one:
a.
Inventory turnover xxxx
b.
Total asset turnover ?????????????
c.
Average collection period
d.
Average payment period
Operating profit margin measures the percentage of each peso sales remaining
after
Select one:
a.
all costs and expenses, including interest, taxes, and preferred stock dividends
have been deducted. xxxxxxxxxxxx
b.
all costs and expenses including interest and taxes are deducted.
c.
all costs and expenses other than interest, taxes, and preferred stock dividends
are deducted. ????????????????
d.all costs and expenses are deducte
Select one:
a.
Ratio analysis
b.
c.
d.
Combined analysis
MIDTERM
The Dupont analysis looks at three main components of the ROE ratio, except
Select one:
a.
b.
Inventory turnover
c.
Net profit margin
d.
Financial leverage
As profit margin decreases, every sale will bring more money to a company’s
bottom line, resulting in a higher overall return on equity.
Select one:
True
False
As asset turnover decreases, a company will generate more sales per asset
owned, resulting in a higher overall return on equity.
Select one:
True
False
As asset turnover increases, a company will generate more sales per asset
owned, resulting in a higher overall return on equity.
Select one:
True
Norte Company reported the following results for 2019:
Annual sales P5,000,000
What is Norte Company’s asset turnover?
Select one:
a.
1 to 1
b.
3.125 to 1
c.
2 to 1
d.
0.5 to 1 xxxxxxx
First statement: Decrease in financial leverage will lead to an increase in
return on equity.
Second statement: By splitting ROE into three parts, companies can more
easily understand changes in their returns on equity over time.
Select one:
a.
b.
c.
d.
Horizontal analysis is also referred to common-size analysis.
Select one:
True
False
The following common size income statement are available for A.M.Y
Corporation for two years ended December 31, 2019, and 2018:
2019 2018
The trend percentages for sales are as follows:
Sales 100% 100%
2017 130%
Cost of sales 55 70
2016 100%
Gross profit 45 30
Operating expenses 20 18
Net income 25% 12%
What should be the trend percentage for gross profit on sales for 2019?
Select one:
a.
195%
b.
130% ??? xxxxxxx
c.
150%
d.
58.5%
First statement: As profit margin increases, every sale will bring more money
to a company’s bottom line, resulting in a higher overall return on equity.
Second statement: As asset turnover increases, a company will generate
more sales per asset owned, resulting in a higher overall return on equity.
Select one:
a.
b.
c.
d.
Decrease in financial leverage will lead to an increase in return on equity.
Select one:
True
False
Horizontal analysis is also referred to
Select one:
a.
trend analysis
b.
vertical analysis
c.
common-size analysis
In 2018, ASB Corporation’s net income was P 1,600,000 and in 2019 it was P
400,000. What percentage increase in net income must ASB achieve in 2020 to
offset 2019 decline in net income?
Select one:
a.
600%
b.
400%
c.
300% ???
d.
60%
Comparative statements are
Select one:
a.
long form reports
b.
Notes to FS
c.
financial statements presenting financial data for two or more periods
d.
financial ratios
It refers to the practice of financing assets with borrowed capital.
Select one:
a.
leverage
b.
arbitrage
c.
discounting
d.
mortgage
The technique of securing funds for investment at a fixed rate of return to fund
suppliers to enhance the well being of common stockholders.
Select one:
a.
Financial arbitrage xxxxxxxxx
b.
Fund management xxxxxxxxxx
c.
Prudent borrowing
d.
Financial leverage
A financial ratio based on the return on equity ratio that is used to analyze a
company’s ability to increase its return on equity.
Select one:
a.
Break-even point analysis
b.
Technical analysis
c.
Dupont analysis
d.
Fundamental analysis
This is an indirect analysis of a company's use of debt to finance its assets. This
is also called equity multiplier.
Select one:
a.
b.
Financial leverage
c.
Net profit margin
d.
Inventory turnover
Horizontal, vertical, and common-size analyses are techniques that are used by
analysts in understanding the financial statements of companies. Which of the
following is an example of vertical, common-size analysis?
Select one:
a.
Commission expense in 2019 is 5% of sales
b.
A comparison in financial ratio between two or more firms in the same industry
c.
A comparison in financial form between two or more firms in the same industry
d.
Commission expense in 2019 is 10% greater than it was in 2018. ?????
xxxxxxxx
First statement: As profit margin decreases, every sale will bring more money
to a company’s bottom line, resulting in a higher overall return on equity.
Second statement: As asset turnover decreases, a company will generate
more sales per asset owned, resulting in a higher overall return on equity.
Select one:
a.
b.
c.
d.
Which of the following does not belong to the list?
Select one:
a.
. Financial ratios xxxxxxxx
b.
Common-size financial statement xxxxxxx
c.
Long-form report
d.
Peso and percentage changes on financial statements
An income statement showing only component percentages is known as
Select one:
a.
Common pesos statement
b.
Common-size income statement
c.
Condensed income statement
d.
Comparative income statement
Horizontal, vertical, and common-size analyses are techniques that are used by
analysts in understanding the financial statements of companies. Which of the
following is an example of vertical, common-size analysis?
Select one:
a.
A comparison in financial ratio between two or more firms in the same industry.
b.
A comparison in financial ratio between two or more firms in the same industry.
c.
Commission expense in 2018 is 5% of sales
d.
Commission expense in 2018 is 10% greater than it was in 2017.
Examiners should determine earnings by
Select one:
a.
looking at interest rate risk sensitivity, availability of assets that can easily be
converted to cash, dependence on short-term volatile financial resources.
b.
observing how lending to specific industries affects an institution.
c.
assessing the company's growth, stability, valuation allowances, net interest
margin, net worth level and the quality of the company's existing assets.
d.
checking if institutions comply with regulations pertaining to risk-based
net worth requirement.
First statement: Investment banks do not take deposits.
Second statement: In CAMEL rating system, banks that are given scores
greater than three are considered to be high-quality institutions.
Select one:
a.
b.
c.
d.
The financial institution that is responsible for the oversight and management of
all other banks is
Select one:
a.
Central bank
b.
Investment bank
c.
Credit union
d.
Commercial bank
Insurance companies are financial institutions that
Select one:
a.
help individuals transfer risk of loss
b.
assist individuals and institutions in buying and selling securities among
available investors.
c.
extend loans for investment with the aim of earning profit.
d.
perform the functions of accepting deposits from the general public
They are the suppliers of funds
I. Lenders
II. Borrowers
III. Savers
IV. Investors
V. Intermediary
Select one:
a.
I & II
b.
I, II, III, & IV
c.
1 & III
d.
I, II, & V
This is a company engaged in the business of dealing with financial and
monetary transactions such as deposits, loans, investments, and currency
exchange.
Select one:
a.
Stock market
b.
Financial institution
c.
Capital market
d.
Financial market
In CAMEL rating system, banks that are given scores greater than three are
considered to be high-quality institutions.
Select one:
True
False
To assess a company's liquidity, the examiners should
Select one:
a.
observe how lending to specific industries affects an institution.
b.
look at interest rate risk sensitivity, availability of assets that can easily be
converted to cash, dependence on short-term volatile financial resources.
c.
assess the company's growth, stability, valuation allowances, net interest
d.
check if institutions comply with regulations pertaining to risk-based net worth
requirement
Index numbers would probably be most interested in which ratio?
Select one:
a.
Common-size statements
b.
Vertical analysis
c.
Trend analysis
d.
Ratio analysis xxxxxxxxx
A financial statement analysis technique that shows changes in the amounts of
corresponding financial statement items over a period of time.
Select one:
a.
Common-size statements
b.
Vertical analysis
c.
Trend analysis
d.
Ratio Analysis
Investment banks do not take deposits.
Select one:
True
False
Examiners assess institutions' capital adequacy through
Select one:
a.
assessing the company's growth, stability, valuation allowances, net interest
b.
observing how lending to specific industries affects an institution.
c.
checking if institutions comply with regulations pertaining to risk-based net
worth requirement.
d.
looking at interest rate risk sensitivity, availability of assets that can easily be
converted to cash, dependence on short-term volatile financial resources and
ALM technical competence.
Answer: A
A.M.Y. Company is preparing its common-size financial statements and revealed
the following:
(in thousands of pesos)
Accounts receivable 20,000
Inventory 40,000
Total current assets 70,000
Total assets 168,000
Bonds payable 42,000
Retained earnings 14,000
Sales revenue 150,000
Cost of goods sold 124,000
Income tax expense 22,000
How would A.M.Y.’s inventory appear on a common-size balance sheet?
Select one:
a.
11.9%
b.
23.8%
c.
57.15% xxxxx
d.
65.3%
First statement: Assessing asset quality involves rating investment risk factors
that the company may face and comparing them with the company's capital
earnings.
Second statement: Asset quality covers an institutional loan's quality, which
reflects the earnings of the institution.
Select one:
a.
b.
c.
d.
A.M.Y. Company is preparing its common-size financial statements and revealed
the following: (in thousands of pesos)
Accounts receivable 20,000
Inventory 40,000
Total current assets 70,000
Total assets 168,000
Bonds payable 42,000
Retained earnings 14,000
Sales revenue 150,000
Cost of goods sold 124,000
Income tax expense 22,000
How’s would A.M.Y’s retained earnings appear on a common-size balance
sheet?
Select one:
a.
9.4% xxxxxxx
b.
8.3%
c.
33.3%
d.
20.0%
They are the users of funds
I. Lenders
II. Borrowers
III. Savers
IV. Investors
V. Intermediary
Select one:
a.
III, IV & V
b.
I & II
c.
II & IV
d.
III & IV
The main reasons to use common-size analysis are enumerated below, except
I. to evaluate information from one period to the next within a company
II. to evaluate a company relative to its competitors.
III. to evaluate the trend situation
Select one:
a.
III
b.
I
c.
I & III
d.
II
The following common size income statement are available for A.M.Y
Corporation for two years ended December 31, 2019, and 2018:
2019 2018
Sales 100% 100%
Cost of sales 55 70
Gross profit on sales 45 30
Operating expenses (including
income tax expense) 20 18
Net income 25% 12%
The trend percentages for sales are as follows:
2017 130%
2016 100%
What should be the trend percentage for gross profit on sales for 2019?
Select one:
a.
150%
b.
130%
c.
195%
d.
58.5%
In vertical analysis all the items in a particular statement are represented as a
percentage of a particular item.
Select one:
True
False
First statement: The statements for two or more periods are used in horizontal
analysis.
Second statement: In vertical analysis all the items in a particular statement
are represented as a percentage of a particular item.
Select one:
a.
b.
c.
Only second statement is true xxxxx
d.
In using CAMEL rating system, banks that are given an average score of less
than two are considered to be less-than-satisfactory.
Select one:
True
False
In using CAMEL rating system, banks with scores greater than three are
considered to be less-than-satisfactory.
Select one:
True
False
A financial institution (FI) is a company engaged in the business of dealing with
financial and monetary transactions such as deposits, loans, investments, and
currency exchange.
Select one:
a.
Financial institution
b.
Financial market
c.
Capital market
d.
Stock market
An institution's ability to create appropriate returns to be able to expand, retain
competitiveness, and add capital is a key factor in rating its continued viability.
Select one:
True
False
The primary purpose of investment banks and investment companies is making
loans to its members, usually for the purchase of real estate or homes.
Select one:
True
False
FINALS
This refers to putting money to work to start or expand a project or to purchase

an asset or interest where those funds are then put to work, with the goal to
income and increased value over time.
Select one:
a.
Stocks
b.
Portfolio
c.
Investing
d.
Investment
The class of stock which has a claim on assets before common stock is known as
Select one:
a.
treasury stock
b.
common stock
c.
preferred stock
d.
no-par value stoc
These are assets held by an entity for accretion of wealth through distribution
such as interest, royalties, dividends and rentals, for capital appreciation of for
other benefits to the investing entity such as those obtained through trading
relationships.
Select one:
a.
Investment
b.
Stocks
c.
Investing
d.
Portfolio
First statement: The borrower is the bond holder.
Second statement: The lender is the bond issuer.
Select one:
a.
b.
c.
d.
It refers to the amount of money for investing for a particular purpose.
Select one:
a.
stocks
b.
petty cash fund
c.
investment fund
d.
bonds
First Statement: Investing involves the purchase of assets with the intent of
holding them for the long term.
Second Statement: Speculation involves attempting to capitalize on market
inefficiencies for short-term profit.
Select one:
a.
b.
c.
d.
Stocks are
Select one:
a.
annuities
b.
debt securities
c.
Dividends ??????
d.
equity securities
First statement: Investing in government bonds means you are lending
money to the government.
Second statement: Investing in government bonds means that you are
borrowing money from the government
Select one:
a.
b.
c.
d.
The class of stock issued by all corporations and which represents the real
equity account capital is
Select one:
a.
treasury stock
b.
common stock
c.
preferred stock
d.
no-par value stock
First statement: Fixed annuities are regulated by state insurance
commissioners.
Second statement: In variable annuity, the insurance company allows to
direct annuity payments to different investment options, usually mutual funds.
Select one:
a.
b.
c.
d.
The risk that the issuer may fail to make timely interest or principal payments
and thus default on its bonds is known as
Select one:
a.
liquidity risk
b.
credit risk
c.
call risk
d.
Inflation risk
The place where buyers and sellers meet to decide on the price to buy or sell
equity securities,usually with the assistance of a broker.
select one:
a.
stock market
b.
mortgage market
c.
bond market
d.
money market
If the corporation issued only one kind of stock, it should be
Select one:
a.
no-par value stock
b.
preferred stock
c.
treasury stock
d.
common stock
These are agreements to buy or sell a specific quantity of a commodity at a

specified price on a particular date in the future.
Select one:
a.
security futures contracts
b.
commodity futures contracts
c.
annuities
d.
options
A company-sponsored retirement account that employees can contribute to
Select one:
a.
401(k) plan
b.
pension
c.
lump-sum
d.
101(k) plan
First statement: The majority of investment fund assets belong to close-end
mutual funds.
Second statement: Close-end funds are managed investment funds that
issue a fixed number of shares, and trade on an exchange.
Select one:
a.
b.
c.
d.
This refers to the risk that investors won’t find a market for the bond, potentially
preventing them from buying or selling when they want.
Select one:
a.
credit risk
b.
call risk
c.
liquidity risk
d.
inflation risk
This annuity combines features of securities and insurance products.
Select one:
a.
Annuity
b.
Fixed annuity
c.
Variable annuity
d.
Indexed annuity
A legally binding agreement between two parties to buy or sell a specific
quantity of shares of an individual stock or a narrow-based security index at a
specified price, on a specified date in the future.
Select one:
a.
security futures contracts
b.
annuities
c.
commodity futures contracts
d.
options
Bonds are
Select one:
a.
debt securities
b.
equity securities
c.
annuities
d.
dividends
A grouping of financial assets such as stocks, bonds, commodities, currencies
and cash equivalents, as well as their fund counterparts, including mutual,
exchange-traded and closed funds is called
Select one:
a.
Portfolio
b.
Leverage
c.
Investment
d.
Investing
These are some of the tools that professional analysts use to look at a
company’s fundamentals, except
Select one:
a.
Times interest earned ratio
b.
. Dividend payout ratio
c.
Price to earnings ratio (P/E)
d.
Earnings per share (EPS)
Stocks that have earnings growing at a faster rate than the market average are
called
Select one:
a.
Value stocks
b.
Income stocks
c.
Growth stocks
d.
Blue-chip stock
Category of stocks that pay dividends consistently
Select one:
a.
Growth stocks
b.
Income stocks
c.
Blue-chip stocks
d.
Value stocks
First statement: Common stockholders can attend at annual general meeting
to cast vote or use a proxy.
Second statement: Non-cumulative preferred stock is preferred stock for
which the right to receive a basic dividend accumulates if the dividend is not
paid.
Select one:
a.
b.
c.
d.
hese are shares in large, well-known companies with a solid history of growth.
They generally pay dividends.
Select one:
a.
Growth stocks
b.
Income stocks
c.
Blue-chip stocks
d.
Value stocks
This means that the data can be measured and stated in a numerical way.
Select one:
a.
Quantitative fundamental analysis
b.
competitive analysi
c.
Comparative analysis
d.
Qualitative fundamental analysis
First statement: Penny stocks do not pay dividends and are highly speculative
Second statement: Corporations raise funds by selling preferred and common
stock to individuals; and other investors who are owners or shareholders in the
firm.
Select one:
a.
b.
c.
d.
This is another ratio that compares the yearly dividend to a share price.
Select one:
a.
dividend yield
b.
divided
c.
dividend payable
d.
dividend payout ratio
The following are the qualitative factors for stock analysis, except
Select one:
a.
Competitive analysis
b.
Corporate governance
c.
Cash flow statement
d.
Business model
Price to Book Ratio or P/B
Select one:
a.
is a ratio that looks at the current sales price of a company as a whole and then
compares it to the per-share earnings.
b.
defines the price to equity and compares the stock’s book value to its market
price
c.
this gives the total return on equity
d.
projects the one-year earnings and growth rate of a company’s stock price.
Shares in very small companies are sometimes called
Select one:
a.
micro-cap stocks
b.
penny stocks
c.
large-cap stocks
d.
mid-cap stocks
The underlying assumption of fundamental analysis is that the price on the
market does not reflect the stock’s actual value. This is called
Select one:
a.
extrinsic value
b.
assessed value
c.
market value
d.
intrinsic value
The very lowest priced stocks are known as
Select one:
a.
micro-cap stocks
b.
mid-cap stocks
c.
penny stocks
d.
small-cap stocks
This term refers to the market dealing with the resale and purchase of
securities or other titles to property or commodities.
Select one:
a.
money market
b.
auction market
c.
secondary market
d.
primary market
First statement: If the stock’s intrinsic or fair market value is higher than the
current price on the market, then the stock is said to be "undervalued".
Second statement: If the fair market value is lower than the price on the
market, then it is “overvalued".
Select one:
a.
b.
c.
d.
When securities are issued and offered by the corporation for the first time to
the public, buyers of such issues are referred to
Select one:
a.
money market
b.
primary market
c.
secondary market
d.
auction market
The data that relates to the quality or character of something, such as how well
a company is managed or whether a company has poor customer satisfaction
ratings
Select one:
a.
Quantitative fundamental analysis
b.
Competitive analysis
c.
Technical analysis
d.
Qualitative fundamental analysis
Projected Earnings Growth or PEG
Select one:
a.
b.
defines the price to equity and compares the stock’s “book” value to its market
price
c.
d.
Price to Earnings Ratio or P/E
Select one:
a.
defines the price to equity and compares the stock’s “book” value to its market
price
b.
c.
d.
First statement: Understanding fundamental analysis is necessary to
determine whether a stock is valued correctly in the market.
Second statement: Analysts typically look at macro and micro factors to
identify stocks that are trading at higher and lower prices.
Select one:
a.
b.
c.
d.
It is used to measure the flow of volume of stocks in positives and negatives
over a period of time.
Select one:
a.
On-Balance Volume
b.
Simple moving average
c.
Relative strength index
d.
Moving average convergence/ divergence
First statement: Technical analysts believe that stock prices move in trends.
Second statement: Fundamental analysts usually look at the supply and
demand for a particular stock in the market and identify patterns.
Select one:
a.
b.
c.
d.
Other terms for government bonds are enumerated below, except
Select one:
a.
treasury bills tbills
b.
treasury bonds
c.
treasury notes
d.
commercial paper
Fundamental analysts focus more on quantitative measures listed below, except
Select one:
a.
earnings
b.
expenses
c.
assets
d.
revenues
The security futures contract specifications include
Select one:
a.
contract size, contract month, and manner of settlement only
b.
contract size, contract month, last trading day and manner of settlement only
c.
contract size and contract month only
d.
contract , contract month and last trading day only
First statement: When you invest in corporate bonds, it means that you are
borrowing money to a corporation.
Second statement: Corporate bonds are sometimes called long-term
commercial papers.
Select one:
a.
Only second statement is true ????///
b.
Both statements are false xxxxxxxx
c.
d.

Financial Analysis

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Financial Analysis

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First statement: It is preferable to use audited financial statements for ratio

According to Dr. Dubos J. Masson, to effectively analyze the financial statements

The following are the categories of financial ratios, except

An income statement showing only component percentages is known as

This refers to putting money to work to start or expand a project or to purchase

These are agreements to buy or sell a specific quantity of a commodity at a

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