Reading 26: Applications of Financial Statement Analysis

Which of the following characteristics is most likely to be observed in the financial statements of a company pursuing a premium differentiation strategy?

When forecasting a company's future sales using a top-down approach, an analyst would typically begin with:

In a simple forecasting model, which of the following items is most commonly estimated as a constant percentage of sales?

If a forecasting model projects a significant increase in sales that requires external financing, the analyst must ensure consistent adjustment of:

Which of the 'Three Cs' of credit analysis refers to the firm management's professional reputation and history of debt repayment?

In credit rating formulas, how is the factor 'Scale and Diversification' generally viewed?

Which of the following ratios is most central to the 'Leverage' category in credit analysis?

Using a specific set of criteria to screen historical data to determine how portfolios would have performed is known as:

Survivorship bias in backtesting equity screens most likely results in:

Unrealized gains on 'held-for-trading' securities are recorded in:

An analyst comparing a US GAAP firm using LIFO to an IFRS firm using FIFO should adjust the LIFO firm's inventory by:

To adjust a LIFO firm's Cost of Goods Sold (COGS) to a FIFO basis during a period of rising prices, the analyst should:

Company A reports LIFO COGS of $5,000. The LIFO reserve was $200 at the beginning of the year and $300 at the end of the year. What is the estimated FIFO COGS?

A firm using straight-line depreciation compared to an otherwise identical firm using accelerated depreciation will typically report:

Which formula provides an estimate of the average age of a firm's assets?

A company reports Gross PPE of $1,000, Accumulated Depreciation of $400, and Depreciation Expense of $50. What is the estimated average remaining useful life of the assets?

When a company grows through acquisition, goodwill is recognized on the balance sheet as:

To calculate a price-to-book value ratio that is comparable between a firm that grew organically and one that grew by acquisition, an analyst should:

An analyst performing a stock screen filters for companies with a Price-to-Earnings (P/E) ratio less than 12. This screen is most likely to exclude:

Which of the following biases refers to finding a relationship in historical data that does not actually exist, often due to testing too many variables?

When forecasting sales for a firm with increasing market share, the analyst should:

Which of the following best describes the treatment of upward revaluation of fixed assets?

If a firm capitalizes an expense that should have been expensed immediately, what is the effect on cash flow from operations (CFO) in the current period?

When analyzing solvency, analysts should estimate the present value of operating lease obligations (under older standards or for adjustment purposes) and:

A screen for high dividend yield is most likely to identify which type of company?

Which inventory valuation method results in a balance sheet inventory value that is closer to current replacement cost?

For credit analysis, 'Margin Stability' is important because:

Which of the following is considered a 'momentum' indicator in equity screening?

When comparing two firms, if Firm A has a significantly higher Average Age of Assets than Firm B, it most likely indicates that Firm A:

Which of the following creates a deferred tax liability?

What is the primary reason an analyst removes goodwill from the balance sheet when calculating financial ratios?

If a company has a debt-to-equity ratio of 1.2, this is classified as a measure of:

In forecasting, if an analyst expects the firm's market share to decrease, the projected sales for the firm will:

Which of the following is a limitation of using a Price-to-Cash Flow ratio in a stock screen?

An analyst calculates the 'Average Useful Life' of a firm's assets as 15 years. If the 'Average Age' is calculated as 12 years, this suggests:

Look-ahead bias occurs when:

When adjusting for an acquisition, any income statement expense from the impairment of goodwill in the current period should be:

Which of the following is typically treated as a 'non-cash' item in a simple cash flow projection model?

If a company's noncash working capital as a percentage of sales increases significantly in a forecast, it implies:

A credit analyst observes that a firm has high 'Operational Efficiency'. This is most likely indicated by:

Company X has LIFO Inventory of $100 and a LIFO Reserve of $20. Company Y has FIFO Inventory of $120. Assuming the firms are otherwise identical, which statement is true regarding their inventory values?

When comparing a company that acquires R&D services (expensed) versus one that develops internally (also expensed), financial statement adjustments are:

Which of the following is a 'Scale' factor in credit analysis?

In the context of equity screening, a 'Value' investor is most likely to look for:

Company Z reports Accumulated Depreciation of $500 and Depreciation Expense of $50. The estimated average age of assets is:

If a company uses aggressive estimates for salvage values (setting them higher), what is the effect on the depreciation expense compared to conservative estimates?

Which of the following describes the 'LIFO Liquidation' effect?

When forecasting, an analyst assumes that 'Noncash working capital' will remain at 20% of sales. If sales are projected to be $1,000, what is the projected noncash working capital?

Under IFRS, if a firm classifies interest paid as a Cash Flow from Financing (CFF) outflow, while a comparable firm classifies it as Cash Flow from Operations (CFO), the analyst should:

An analyst estimates that a company has $100 million in operating lease commitments (present value). To adjust the debt-to-equity ratio, the analyst should: