Financial Instruments: Investments In Bonds And Equity Securities

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The Framework for Financial Reporting
Accounting Judgements
Statements of Income and Comprehensive Income
Statements of Financial Position and Changes in Equity; Disclosure Notes
The Statement of Cash Flows
Revenue Recognition
Financial Assets: Cash and Receivables
Cost-Based Inventories and Cost of Sales
Long-Lived Assets
Depreciation, Amortization, and Impairment
Financial Instruments: Investments in Bonds and Equity Securities

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Question 1

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Financial statement analysis is only used to determine whether a company is worth investing in.

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Question 2

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A prospective investor in common shares is primary interested in the long-run profitability of the company.

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Question 3

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A trade creditor will be primarily interested in the long-run profitability of the company.

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Question 4

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A clean opinion is another term to describe a company that has received an unqualified audit report.

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Question 5

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All companies are required to have audits.

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Question 6

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Information about the significant accounting policies of an entity is not necessary because GAAP prescribes uniform accounting treatment of all items,and it is widely understood.

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Question 7

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The statement of significant accounting policies,which is included in the notes to the financial statements,must include reasons for the selection of one generally accepted accounting method over another generally accepted accounting method.

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Question 8

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A statement of accounting policies must be included in the annual financial statements.

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Question 9

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A statement of accounting policies is required to be clearly enunciated in the notes to the financial statements.

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Question 10

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Published financial statements are always the best source of timely information on practically all financial items relevant to investors and creditors.

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Question 11

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A primary reason for the analysis of financial statements is identification of major changes and to provide relative relationships among dollar amounts.

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Question 12

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One of the most important aspects of analysis of financial statements is the wording of the auditors' report.

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Question 13

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A qualified auditors' opinion is given when the financial statements present information in conformity with GAAP.

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Question 14

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Examination of comparative financial statements does not enable financial statement users to better identify long-term trends.

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Question 15

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GAAP requires the presentation of financial statements for the current year and the two immediately preceding reporting periods.

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Question 16

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Vertical analysis of financial statements refers to the development of percentages indicating the proportionate changes in selected financial statements for two or more reporting periods.

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Question 17

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In horizontal analysis of financial statements,the base amounts used for purposes of comparison are the financial results of a previous time period.

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Question 18

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Ratios that measure current position are useful for assessing the ability of a company to pay its short-term obligations.

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Question 19

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The current ratio is one measure of the adequacy of a company's working capital.

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Question 20

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A high working capital ratio is always a favourable situation from the shareholders' viewpoint.

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