Question

Cost of goods sold (cost of sales) may include all of the following except. 1) Raw...

Cost of goods sold (cost of sales) may include all of the following except.

1)

Raw materials

2)

Direct (factory) labor

3)

Management salaries

4)

Purchased components

Which of the following is true when using the earnings record to appraise a stock for investment?

1)

Multiples used in valuation should relate to average earnings.

2)

Be justified by indications available about the future.

3)

Cover at least five years and preferably 7-10 years (Professor L says 10+).

4)

All of the above.

Which of a company's three main financial statements is easiest to manipulate?

1)

Income statement

2)

Balance sheet

3)

Cash flow statement

4)

Management letter
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Homework Answers

Answer #1

1. Option 3 Management Salaries
COGS does not include management fees as they are part of selling and general administration and not part of cost of goods sold.

2. Option 4 All of the above. Using average earnings, indications about future and covering at least 5 years help to appraise a stock better.

3. Option 1 is correct because income statement can be manipulated b delaying or advancing revenue recognition and cogs , inventory can be manipulated by using LIFO or FIFO, depreciation can also be manipulated in such a way that taxes can reduced.

Best of Luck. God Bless

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