1.

 Which of the following is likely to be the most informative source if you were interested in a
company's business plan or strategy? 

Management discussion and analysis

2. Wilco Company reports the following:

Dividend payout ratio for 2005 was:

Dividend paid for 2005=(Retained Earnings 2004 + Net income 2005) – Retained Earings 2005 =
(1300000 + 900000) – 2000000 = $200000

200000
Dividend payout ratio= =0.222=22.2 %
900000

3.  You are analyzing a large stable company. For the year ending 12/31/05 the company
reported earnings of $58,900K and book value at the end of 2005 was $371,700K. You
expect earnings to grow at 5% a year in perpetuity, and the dividend payout ratio of 70%
to continue. The company borrows at 8%, and has a cost of equity of 12%. The company
has 25,000K shares outstanding.

4. What is your estimate of price per share using the dividend discount model at 12/31/05? 

( 58900∗1.05∗0.7 ) /(0.12−0.05)
=$ 24.74
25000

5. What is your estimate of price using the residual income valuation model at 12/31/05? 

371700+ ( 58900∗1.05−( 0.12∗371700 ) ) /(0.12−0.05)

=$ 24.72
25000

6.  When conducting comparative analysis by reviewing consecutive balance sheets, 

All items on the balance sheet in year t must be divided by their correspoding value in year t-1 and
subtract 1. All items on the balance sheet in year t-1 must be subtracted from their correspoding value in
year t
7. You have prepared a trend series for Company XYZ for three years, 2004-2006 inclusive, using
2004 as the base year. Below are selected data.

8. What is Dell's profit margin for 2005? 

26458
Profit margin= =0.0638=6.38 %
41444

9. What is Dell's profit margin for 2006? 

3043
Profit margin= =0.0618=6.1 8 %
49205

10. What is Dell's P/E ratio for 2006?

33.44
  P/ E ratio= =27.63
1.21
11. What is Dell's asset turnover for 2006? 

49205
Asset turnover= =2.314
(23215+ 19311) /2

12. Which would be issued by auditors where there is a history of significant losses coupled with
uncertain prospects? 

An “except for” qualification

13. Which of the following is not considered part of GAAP? 

International accounting standards (IAS)

14. Audit risk represents a danger to users of audited financial statements. The following are
attributes pointing to potential areas of vulnerability except 

Company earning high profits consistently over a number of years

15. If a company fails to record a material amount of depreciation in a previous year, this is
considered: 

An accounting error

16.

*All sales are on credit.

 16. How much did the company collect in cash from debtors during 2006?
34289−29678+ 450000=$ 454611

17. How much sales would have been reported by the company in 2006 if Byfort would have
been using cash accounting and not accrual accounting? 

34289−29678+ 450000=$ 454611

18. 10-K reports are:

 A 10-K is a comprehensive report filed annually by public companies about their

financial performance.
 The report is required by the U.S. Securities and Exchange Commission (SEC)
and is far more detailed than the annual report.
 Information in the 10-K includes corporate history, financial statements, earnings
per share, and any other relevant data.
 The 10-K is a useful tool for investors to make important decisions about their
investments.
 

19. The management of Finner Company believes that "the statement of cash flows is not a very
useful statement" and does not include it with the company's financial statements. As a result the
auditor's opinion should be: 

- A result the auditor's opinion should be qualified

20. Which of the following statements is incorrect

Không dữ liệu

21. When analyzing financial statements it is important to recognize that accounting distortions can
arise. Accounting distortions are those things that cause deviations in accounting information from
the underlying economics. Which of the following statements is not correct? Accounting
distortions: 

- Arise if the stock market is not efficient