5 Written Questions

1. -comparable across companies
   -analysts could focus on the bottom line- earnings
   -the statements would always fully reflect the economic position of the firm
2. 1. Responsibility of management to prepare accounts
   2. Independence of auditors
   3. Properly prepared in accordance with relevant GAAP
   4. Free from material misstatement
   5. Accounting principles and estimates chose are reasonable.
   6. opinion on internal control systems
3. "snap shot" at a point in time listing firm resources (assets), liabilities (future costs), and residual interest owner's equity.
4. Take financial reports by companies evaluate the past, current and prospective performance and financial condition and use that information to make investment, credit and better economic decisions.
5. Reports amounts and sources of changes in investor's equity over the period

5 Matching Questions

1. Financial statement analysis framework
2. Short term creditors
3. The role of corporate managers:
4. Cash Flow Statement (analyst focus)
5. Management discussion and analysis (MD&A)

1. a Must highlight favorable and unfavorable business trends, results from operations, trends in sales and expenses (inflation), capita resources and liquidity, cash flow trends, business overview, material events and uncertainties.
2. b -liquidity
   -Sources and uses of cash
   -Solvency
   -Financial flexibility
3. c -responsible for form and content
   -selection of various accounting methods
   -compilation of accounting data
   -preparation of the financial statements
   -issuance financial statements
4. d Interested in liquidity of the business and financial position
5. e 1. Purpose and context of analysis: who, what, when and why of analysis
   2. Collect data- historical, macro assessment, industry evaluation
   3. Process data- Read and evaluate the data, make adjustments, prepare common size statements
   4. Analyze/interpret data: interpret the data
   5. Conclusions and recommendations
   6. Update analysis periodically

5 Multiple Choice Questions

1. -external approach vs. internal analysis
   -publicly traded firms vs. private firms
   -financial statements that adhere to US GAAP vs. IAS
   -Dependence upon general purpose external financial reports provided by management
   1. The role of the financial analyst
   2. The role of corporate managers:
   3. Role of financial statement analysis
   4. Role of financial reporting:
2. Provide information about performance, financial position, changes in financial position (firm resources versus claims against the firm) for a wide range of users.
   1. Role of financial statement analysis
   2. Role of financial reporting:
   3. About The Audit Report
   4. The role of the financial analyst
3. -Investors (debt and equity)
   -Government (taxes/regulators)
   -Others (public, special interest groups, workforce0
   1. Balance Sheet
   2. Income Statement
   3. Footnotes
   4. Classes of user
4. Evaluating an equity investment, forecasting net income and cash flow
   -Evaluate a merger or acquisition candidate
   -Deciding whether to make a venture capital or private equity investment.
   -Determining credit worthiness of a company, assign debt ratings & compliance with debt covenants
   1. Role of financial statement analysis
   2. Role of financial reporting:
   3. 5 principal financial statements
   4. Examples of Financial statement analysis
5. -Amounts and sources of changes in investors equity over the period
   -AKA statement of retained earnings
   -Stock issuance and repurchase
   -Certain adjustments to equity from events not recorded on the income statement
   -"other comprehensive income"
   1. Statement of changes in owners (shareholders) equity
   2. Statement of Cash Flows
   3. What does income statement do?
   4. what does the statement of changes in owners equity do?

5 True/False Questions

1. Footnotes → -Audited information about accounting methods, assumptions, management estimates

   True        False

2. Statement of Cash Flows → Classifies how a firm generates cash flows based on 3 categories:
   -Operating based on a firms primary operating activities and day to day business operations
   -Investing cash flows derived from purchasing and disposing of long term assets
   -Financing cash flows related to obtaining or repaying capital to shareholders and long term creditors

   True        False

3. what does the cash flow statement do? → Reconciles beginning and ending cash balance with CFD, CFI and CFF for a period of time.

   True        False

4. Alternatively financial statements are not comparable: → -diverge in the recognition and timing of certain events
   -recognition of revenues and expenses, value of assets on the balance sheet, ect.
   -Many economic events are not recognized at all

   True        False

5. What does income statement do? → Summarizes events over a period of time measuring revenues, expenses, and gains/losses

   True        False