Certified Valuation Analyst CVA Financial Statement Analysis 4

Question 1

An analyst compares a subject company's margins to industry medians. This technique is called what?

Accepted Answer

Benchmarking (comparative ratio analysis)

Answer

Vertical integration

Answer

Discounting

Answer

Capitalization of earnings

Question 2

Which item on the statement of cash flows would an analyst scrutinize to detect aggressive revenue recognition?

Accepted Answer

Growing gap between net income and operating cash flow

Answer

Increase in long-term debt

Answer

Dividends paid

Answer

Stock buybacks

Question 3

Return on equity can be inflated by which financing choice even if operating performance is unchanged?

Accepted Answer

Increasing financial leverage (more debt)

Answer

Issuing more equity

Answer

Holding more cash

Answer

Reducing sales

Question 4

When normalizing the balance sheet, how should a non-operating asset like excess investment securities be treated?

Accepted Answer

Separated out as a non-operating asset

Answer

Included in working capital

Answer

Added to goodwill

Answer

Expensed immediately

Question 5

A high inventory turnover ratio relative to peers generally indicates what?

Accepted Answer

Efficient inventory management or strong sales

Answer

Excess obsolete stock

Answer

Poor collections

Answer

High interest expense

Question 6

Which adjustment addresses related-party transactions priced below market?

Accepted Answer

Restate the transaction to arm's-length market terms

Answer

Eliminate the entire revenue line

Answer

Capitalize the difference

Answer

Ignore it for valuation

Question 7

Trend analysis across five years of statements is most useful for identifying what?

Accepted Answer

Sustainable growth patterns and anomalies

Answer

A single year's tax rate

Answer

The par value of stock

Answer

The auditor's fee