Comparative statements 

are

Select one:
a.
Notes to FS
b.
 long form reports
c.
 financial statements presenting financial data for two or more periods
d.
 financial ratios
In 2018, ASB Corporation’s net income was P 1,600,000 and in 2019  it was P
400,000. What percentage increase in net income must ASB achieve in 2020  to offset
2019 decline in net income?

Select one:
a.
60%
b.
400%
c.
300%
d.
600%
 First statement: As profit margin increases, every sale will bring more money to a
company’s bottom line, resulting in a higher overall return on equity.

Second statement: As asset turnover increases, a company will generate more sales
per asset owned, resulting in a higher overall return on equity.
Select one:
a.
Only first statement is true
b.
Both statements are true
c.
Only second statement is true
d.
Both statements are false
As asset turnover decreases, a company will generate more sales per asset owned,
resulting in a higher overall return on equity.

Select one:
True
False
 Norte Company reported the following results for 2019:

          Annual sales            P5,000,000

          Net earnings                800,000

          Investment                2,500,000

What is Norte Company’s asset turnover?

Select one:
a.
0.5 to 1
b.
2 to 1
c.
3.125 to 1
d.
1 to 1
 It refers to the practice of financing assets with borrowed capital.

Select one:
a.
leverage
b.
mortgage
c.
discounting
d.
arbitrage
This is an indirect analysis of a company's use of debt to finance its assets. This is
also called equity multiplier.

Select one:
a.
 Total asset turnover
b.
Net profit margin
c.
Financial leverage
d.
 Inventory turnover
The following common size income statement are available for A.M.Y Corporation
for two years ended December 31, 2019, and 2018:
 2019              2018        
The trend percentages for sales are as follows:
Sales      100%            100%            2017                   130%

Costofsales      55                 70             2016                   100%

Gross profit    45                 30           

 Operating expenses    20                 18    

  Net income           25%               12% 

What should be the trend percentage for gross profit on sales for 2019?

Select one:
a.
58.5%
b.
150%
c.
195%
d.
130%
 As profit margin decreases, every sale will bring more money to a company’s bottom
line, resulting in a higher overall return on equity.

Select one:
True
False
First statement: As profit margin decreases, every sale will bring more money to a
company’s bottom line, resulting in a higher overall return on equity.

Second statement: As asset turnover decreases, a company will generate more sales
per asset owned, resulting in a higher overall return on equity.
Select one:
a.
Both statements are false
b.
Only second statement is true
c.
Both statements are true
d.
Only first statement is true
Which of the following does not belong to the list?

Select one:
a.
Long-form report
b.
. Financial ratios
c.
Common-size financial statement
d.
Peso and percentage changes on financial statements
Horizontal, vertical, and common-size analyses are techniques that are used by
analysts in understanding the financial statements of companies. Which of the
following is an example of vertical, common-size analysis?

Select one:
a.
Commission expense in 2019  is 5% of sales
b.
A comparison in financial form between two or more firms in the same industry
c.
 Commission expense in 2019 is 10% greater than it was in 2018.
d.
 A comparison in financial ratio between two or more firms in the same industry
 Decrease in financial leverage will lead to an increase in return on equity.

Select one:
True
False
As asset turnover increases, a company will generate more sales per asset owned,
resulting in a higher overall return on equity.

Select one:
True
False
Horizontal analysis is also referred to

Select one:
a.
trend analysis
b.
common-size analysis
c.
vertical analysis
The technique of securing funds for investment at a fixed rate of return to fund
suppliers to enhance the well being of common stockholders.  

 
 

Select one:
a.
Financial leverage
b.
Prudent borrowing
c.
 Fund management
d.
Financial arbitrage
A financial ratio based on the return on equity ratio that is used to analyze a
company’s ability to increase its return on equity.

Select one:
a.
 Dupont analysis
b.
Fundamental analysis
c.
Technical analysis
d.
Break-even point analysis
Horizontal analysis is also referred to common-size analysis.

Select one:
True
False
 First statement: Decrease in financial leverage will lead to an increase in return on
equity.
Second statement:  By splitting ROE into three parts, companies can more easily
understand changes in their returns on equity over time.

Select one:
a.
Both statements are true
b.
Only first statement is true
c.
Only second statement is true
d.
Both statements are false
 The Dupont analysis looks at three main components of the ROE ratio, except

Select one:
a.
 Inventory turnover
b.
Total asset turnover
c.
Financial leverage
d.
Net profit margin

A.M.Y. Company is preparing its common-size financial statements and revealed the
following:

                                                             (in thousands of pesos)

Accounts receivable                                 20,000

Inventory                                                  40,000

Total current assets                                  70,000

Total assets                                             168,000  

Bonds payable                                          42,000

Retained earnings                                     14,000

Sales revenue                                          150,000

Cost of goods sold                                  124,000

Income tax expense                                  22,000

 How’s would A.M.Y’s retained earnings appear on a common-size balance sheet?

Select one:
a.
20.0%
b.
8.3%
c.
9.4%
d.
33.3%
 First statement: Investment banks do not take deposits.

Second statement: In CAMEL rating system, banks that are given scores greater than
three are considered to be high-quality institutions.
Select one:
a.
Both statements are false
b.
Only second statement is true
c.
Both statements are true
d.
Only first statement is true
 Insurance companies are financial institutions that

Select one:
a.
help individuals transfer risk of loss

b.
 extend loans for investment with the aim of earning profit.
c.
 perform the functions of accepting deposits from the general public
d.
assist individuals and institutions in buying and selling securities among available
investors.
Investment banks do not take deposits.

Select one:
True
False
 Examiners assess institutions' capital adequacy through
Select one:
a.
 looking at interest rate risk sensitivity, availability of assets that can easily be
converted to cash, dependence on short-term volatile financial resources and ALM
technical competence.
Answer: A

b.
assessing the company's growth, stability, valuation allowances, net interest margin,
net worth level and the quality of the company's existing assets.
c.
observing how lending to specific industries affects an institution.
d.
checking if institutions comply with regulations pertaining to risk-based net worth
requirement.

Index numbers would probably be most interested in which ratio?

Select one:
a.
Ratio analysis
b.
Vertical analysis
c.
Common-size statements
d.
Trend analysis
First statement: Assessing asset quality involves rating investment risk factors that
the company may face and comparing them with the company's capital earnings.

Second statement:  Asset quality covers an institutional loan's quality, which reflects

the earnings of the institution.
Select one:
a.
Only first statement is true
b.
Both statements are false
c.
Both statements are true
d.
Only second statement is true
 Examiners should determine earnings by

Select one:
a.
observing how lending to specific industries affects an institution.
b.
assessing the company's growth, stability, valuation allowances, net interest margin,
net worth level and the quality of the company's existing assets.
c.
checking if institutions comply with regulations pertaining to risk-based net worth
requirement.
d.
looking at interest rate risk sensitivity, availability of assets that can easily be
converted to cash, dependence on short-term volatile financial resources.
To assess a company's liquidity, the examiners should

Select one:
a.
 assess the company's growth, stability, valuation allowances, net interest margin, net
worth level and the quality of the company's existing assets.
b.
 observe how lending to specific industries affects an institution.
c.
check if institutions comply with regulations pertaining to risk-based net worth
requirement.
d.
 look at interest rate risk sensitivity, availability of assets that can easily be converted
to cash, dependence on short-term volatile financial resources.
 The main reasons to use common-size analysis are enumerated below, except

     I.    to evaluate information from one period to the next within a company

     II.   to evaluate a company relative to its competitors.

     III.  to evaluate the trend situation 

Select one:
a.
I & III
b.
II
c.
I
d.
III

This is a company engaged in the business of dealing with financial and monetary

transactions such as deposits, loans, investments, and currency exchange.
Select one:
a.
Stock market
b.
Financial market
c.
Financial institution
d.
Capital market
An income statement showing only  component percentages is known as

Select one:
a.
 Condensed income statement
b.
Common pesos statement
c.
Common-size income statement
d.
Comparative income statement
 A financial statement analysis technique that shows changes in the amounts of
corresponding financial statement items over a period of time.

Select one:
a.
Vertical analysis
b.
Common-size statements
c.
Trend analysis
d.
Ratio Analysis
A.M.Y. Company is preparing its common-size financial statements and revealed the
following:

                                                        (in thousands of pesos)

Accounts receivable                               20,000

Inventory                                                40,000

Total current assets                                70,000

Total assets                                           168,000  

Bonds payable                                        42,000

Retained earnings                                  14,000

Sales revenue                                        150,000

Cost of goods sold                                124,000

Income tax expense                                22,000

 How would A.M.Y.’s  inventory appear on a common-size balance sheet?

Select one:
a.
65.3%
b.
57.15%

c.
11.9%
d.
 23.8%
In CAMEL rating system, banks that are given scores greater than three are
considered to be high-quality institutions.

Select one:
True
False
The financial institution that is responsible for the oversight and management of all
other banks is

Select one:
a.
Investment bank
b.
Commercial bank
c.
Credit union
d.
Central bank

 They are the users of funds

I. Lenders

II. Borrowers

III. Savers

IV. Investors

V. Intermediary
 

Select one:
a.
III & IV
b.
I & II
c.
II & IV
d.
III, IV & V

They are the suppliers of funds

I.  Lenders

II. Borrowers

III. Savers

IV. Investors

V. Intermediary

Select one:
a.
I & II
b.
1 & III
c.
I, II, & V
d.
I, II, III, & IV

 A financial institution (FI) is a company engaged in the business of dealing with

financial and monetary transactions such as deposits,  loans, investments, and
currency exchange.

Select one:
a.
Financial institution
b.
 Stock market
c.
Capital market
d.
 Financial market
Asset quality covers an institutional loan's quality, which reflects the earnings of the
institution.

Select one:
True
False
By splitting ROE into three parts, companies can more easily understand changes in
their returns on equity over time.

Select one:
True
False
In vertical analysis all the items in a particular statement are represented as a
percentage of a particular item.

Select one:
True
False
In using CAMEL rating system, banks that are given an average score of less than two
are considered to be less-than-satisfactory. 

Select one:
True
False
 They are considered users of funds

  I. Lenders

  II. Borrowers

  III. Savers

  IV. Investors

  V. Intermediary

Select one:
a.
II & IV
b.
III, IV & V
c.
I & II
d.
III & IV
 As profit margin increases, every sale will bring more money to a company’s bottom
line, resulting in a higher overall return on equity.

Select one:
True
False
 Assessing asset quality involves rating investment risk factors that the company may
face and comparing them with the company's capital earnings.

Select one:
True
False
The statements for two or more periods are used in horizontal analysis.

Select one:
True
False
In using CAMEL rating system, banks with scores greater than three are considered to
be less-than-satisfactory.

Select one:
True
False
The primary purpose of investment banks and investment companies is making loans
to its members, usually for the purchase of real estate or homes.
Select one:
True
False
An institution's ability to create appropriate returns to be able to expand, retain
competitiveness, and add capital is a key factor in rating its continued viability.

Select one:
True
False
First statement: The statements for two or more periods are used in horizontal
analysis.

Second statement: In vertical analysis all the items in a particular statement are
represented as a percentage of a particular item.

Select one:
a.
Only second statement is true
b.
Only first statement is true
c.
Both statements are true
d.
Both statements are false