5 multiple choice questions financial statement development and analysis

I have 5 mulitple choice questions that I need to have complete and returned to me by 1:00 pm CST on 5/28/17.  Must have accounting or finance background to answer.

1.   Short-term liquidity results that would cause an analyst the most concern are:

A.        an increase in the inventory conversion cycle and a decrease in the net cash conversion


B.        a decrease in the inventory conversion cycle and an increase in the net cash conversion


C.        a decrease in the inventory conversion and net cash conversion cycles.

D.        an increase in the inventory conversion and net cash conversion cycles.

Answer:  __________

2. Domestic Co. establishes Foreign Subsidiary Co. at the beginning of the current reporting year. The primary analytical consideration resulting from this business decision is the:

A.        establishment of a separate legal entity.

B.        additional financial statements produced by the newly created entity.

C.        creation of more detailed segment disclosures.

D.        reporting of Domestic Co.’s financial statements on a consolidated basis.

Answer:  __________

3.  An analyst would be most concerned with a business that pays dividends if it is in its:

A.        emerging stage with little earnings history.

B.        mature stage with earnings equal to the industry’s average.

C.        final period of decline.

D.        growth stage with substantial cash on hand and retained earnings.

Answer:  __________

4.  Assume that an entity depreciates equipment purchased this year on a straight-line basis for financial reporting purposes and uses an accelerated method for tax purposes. If the company acquires more expensive equipment in the next reporting year, the company’s next balance sheet would report a ____________ than the current balance sheet.

A.        larger deferred tax liability

B.        smaller deferred tax liability

C.        larger deferred tax asset

D.        smaller deferred tax asset

Answer:  __________

5.  An analyst would be most concerned about earnings sustainability when encountering:

A.        operating expense categories, such as cost of goods sold.

B.        recurring losses and gains attributable to multiple corporate restructurings.

C.        a decline in salaries expense.

D.        an increase in research and development costs.

Answer:  __________

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