Question

1) When an investing company owns less than 50 percent of another company, the companies must prepare consolidated financial statements.

2) Goodwill is amortized on the consolidated financial statements.

3) To compare companies that differ in size, analysts use ________.

A) MD&A

B) 10-K filings with the Securities and Exchange Commission

C) common size financial statements

D) consolidated financial statements

4) Comparing a company's current ratio today with the same company's current ratio for the past ten years is called a(n) ________.

A) cross-sectional comparison

B) benchmark comparison

C) industry comparison

D) time-series comparison

5) The financial ratios for a company can be evaluated using ________.

A) time-series comparisons

B) benchmark comparisons

C) cross-sectional comparisons

D) all of the above

6) Comparing a company's debt-to-equity ratio for 2014 to the debt-to-equity ratios for 2014 from other companies in the same industry is called a(n) ________

.A) time-series comparison

B) benchmark comparison

C) cross-sectional comparison

D) efficient ratio analysis

7) All other things equal, a higher current ratio indicates that ________.

A) a company has excess cash to pay liabilities

B) a short-term creditor is likely to be paid in full and on time

C) a company's long-term debt is coming due within the next year

D) a company's short-term debt is coming due within the next year

Answer 1

Answer to the first question is FALSE as there is no need of preparing consolidated financial statements if the share of a party doesn't exceed 50%.

Answer to the second question :- Goodwill is not amortized on the consolidated financial statements. As per rules Goodwill is not amortized as if shown as an intangible asset in balance sheet.

Answer to the third question :- To compare companies that differ in size, analysts use common size financial statements.

Answer to the fourth question :- Comparing a company's current ratio today with the same company's current ratio for the past ten years is called time series comparison as when comparison is made of past years it relates to time series analysis.