Free Financial Statement Analysis Questions and Answers

Question 1

The payment of cash dividends is an illustration of:

Accepted Answer

Cash flows from financing activities

Answer

Cash flows from operating activities

Answer

Cash flows from investing activities

Question 2

Basic earnings per share are computed as follows:

Accepted Answer

[Net Income-Preferred Dividends]/Weighted Avg # of common shares outstanding

Answer

[Net Income]/[Common shares outstanding]

Answer

[Net Income- Dividends]/Weighted Avg # of shares outstanding

Question 3

The opinion section of an independent auditor's report begins, "In our opinion, the aforementioned financial statements fairly present the financial position in all material respects..." This language specifies .

Accepted Answer

An unqualified opinion

Answer

A disclaimer of opinion

Answer

A qualified opinion

Question 4

A company's net income is 200, accounts receivables increased by 30, depreciation increased by 55, and accounts payable decreased by 25. It has a ________ operating cash flow.

Accepted Answer

200

Answer

285

Answer

230

Question 5

Stock dividends and stock splits are dissimilar because

Accepted Answer

In a stock split a larger number of new shares replaces the outstanding shares

Answer

A stock dividend results in a decline in the par value per share

Answer

Stock splits are paid in additional shares of common stock, whereas a stock dividend results in replacement of all outstanding shares with a new issue of shares

Question 6

Which of the following would be considered an investment cash inflow?

Accepted Answer

Proceeds from selling investments in the equity securities of other companies

Answer

Cash paid for dividends

Answer

Cash paid to retire bonds

Question 7

Which of the following would be considered an investment cash inflow?
I. Proceeds from the sale of debt securities of other entities, excluding cash equivalents II. Proceeds from the collection of loan principals III. Proceeds from the sale of equity investments in other firms

Accepted Answer

All responses are correct

Answer

Only I is correct

Answer

I and II are correct

Question 8

The primary earnings per share data are calculated using the treasury stock method as though outstanding options and warrants (for the entire year) were exercised at the

Accepted Answer

Beginning of the period and as if the funds obtained thereby were used to purchase common stock at the average market price during the period

Answer

Beginning of the period and as if the funds obtained thereby were used to purchase common stock at the current market price in effect at the end of the period

Answer

End of the period and as if the funds obtained thereby were used to purchase common stock at the current market price in effect at the end of the period

Question 9

Retained profits are what:

Accepted Answer

Accumulated, undistributed earnings since inception

Answer

Earnings inclusive of any paid-in capital since inception

Answer

Undistributed net income in the last accounting period

Question 10

The following list includes operating cash flows?
I. Interest paid; II. Interest earned; and III. Dividends received. IV. Dividends received

Accepted Answer

I, II & III

Answer

I, II, III & IV

Answer

I & III