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← Introduction to Financial Analysis

Part I. Financial Statements and Ratio Analysis and Forecasting

3.18: Chapter Three- Review Questions

38 of 150 · 260 words

From Introduction to Financial Analysis by LibreTexts (Kenneth S. Bigel, Touro University), used under the CC BY 4.0 licence. Written for a general audience, not for NEPSE.

  1. 1Is the Income Statement a “flow” or a “static” statement?
  2. 2Do Income Statement numbers get bigger, smaller, or neither – as time passes?
  3. 3When, if ever, and how, if so, do the Income Statement numbers revert to zero?
  4. 4Using the template below, create an Income Statement in both dollar terms and in “common size,” using the same company as you used in the prior problem set.
  5. 5Are Revenues and Expenses respectively debit or credit balance accounts?
  6. 6Differentiate between a “cash” versus a “non-cash expense”? What are the tax implications for each?
  7. 7Which Income Statement item distinguishes between operating matters and all the stuff below it? By what two names is it referred?
  8. 8What is the “Addition to Retained Earnings”? How is it calculated, and what is its relationship to “Retained Earnings”?
  9. 9What is “Depreciation Expense”?
  10. 10Among Property, Plant and Equipment, which is/are depreciated and which not?
  11. 11Explain each of the four interpretation problems financial analysts encounter in reading the accountant’s reports.
  12. 12How are audits opinions potentially different from one another? Does the financial analyst care?
  13. 13You are given the following information. Create a table and calculate the annual depreciation and account balances, using all three reporting methods discussed:
  14. 14Calculate the Cost of Goods Sold, given the following inventory data:
  15. 15What does “COGS” include?
  16. 16By what criterion does the accountant “impute” depreciation to COGS?
  17. 17Given the data below, calculate the FIFO and LIFO Ending Inventory, and COGS.
  18. 18Define “LIFO Base.”
  19. 19What is the technical interim reporting issue in using LIFO?
  20. 20Can the corporation switch back and forth from FIFO to LIFO?

This chapter at LibreTexts (Kenneth S. Bigel, Touro University). Tables and text are reproduced; images, videos and quizzes are not.