Financial Statement Analysis

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Financial Statement AnalysisHeading-Display All QuestionsTrue-False Questions[Q1] True False-2 PointsNet Operating Assets (NOA) is determined by subtractingnon-operating assets fromtotalassets.[Q2]TrueFalse-2 PointsOperating assets typically include cash, receivables, property, plant and equipment (PPE),and capitalized lease assets.[Q3]TrueFalse-2 PointsTax expense on the income statement reflects both operating andnon-operating revenueand expenses.[Q4] True False-2 PointsOperating assets exclude short-term and long-term investments in marketable securities.[Q5]TrueFalse-2 PointsAll things equal, ahigherNOAT is preferable than alowerone.[Q6]TrueFalse-2 PointsNet Operating Assets = Net Nonoperating Obligations + Stockholders' Equity[Q7] True False-2 PointsA limitation of Generally Accepted Accounting Principles (GAAP) is that financial statementsreflect whatcan be reliably measured, therefore, excluding some assets that cannot bereliably measured.[Q8] TrueFalse-2 PointsThe net assets of discontinued operations should be considered to be nonoperating,however, their after-tax profit (loss) should be treated as operating.[Q9]TrueFalse-2 PointsVertical analysisfacilitates comparisons within a set of financial statements andhorizontalanalysisprovides comparisons across time periods.[Q10] True False-2 PointsRatiosprovide one way to compare companies in the same industry, regardless of theirsize.[Q11] TrueFalse-2 PointsHighly leveraged firms have ahigher RNOA than firms with lower leverage.[Q12]TrueFalse-2 Points

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Repurchasing shares ofcommon stock near year end will increase a firm's return on equity(ROE).[Q13] True False-2 PointsTo determine tax on net operating profit, we begin with total tax expense anddeducttaxes related tonet nonoperating expenses.[Q14] True False-2 PointsNOPAT is equivalent to incomebeforetax from operating activities.[Q15] True False-2 PointsNOPAT is equivalent to incomeaftertax from operating activities.[Q16] True False-2 PointsIncreasing a company's net operating asset turnover (NOAT) increases both RNOA andROE.[Q17] True False-2 PointsIf companyA has a higher net operating profit margin (NOPM) than Company B, thenCompany A's RNOA will be higher.[Q18]TrueFalse-2 PointsNet operating asset turnover (NOAT) measures a company's profitabiltiy.[Q19]TrueFalse-2 PointsAll else being equal, higher financial leverage willdecreasea company's debt rating andincreasethe interest rate it must pay.[Q20] TrueFalse-2 PointsA current ratio greater than 1.0 isgenerallydesirable for a company.[Q21] True False-2 PointsSolvency ratios measure a company's ability to meet its debt obligations.[Q22]TrueFalse-2 PointsThe DuPontanalysis disaggregates return on equity into profitability, efficiency andleverage components.Pg. 4-30[Q23] True False-2 PointsThe times Interest Earned (T.I.E.) ratio is a financial metric used to assess a company'ssolvency.[Q24] True False-2 PointsThe quick ratio includes cash, accounts receivable andinventory assets in the numerator.One benefit ofusing ratio analysis

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