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MBA Prep CFIN with questions and answers (download to pass).
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MBA Prep CFIN with questions and answers (download to pass).
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MBA Prep CFIN with questionsand answers (download to
pass)
Analysts within a company are more likely to fall into the "false accuracy
trap" when they develop pro formas than would external analysts because
insiders have access to more detailed information - answer True
When making financial projections, if a particular expense item cannot be
predicted with any degree of confidence, it should be forecast at the
highest level it would ever likely to reach, so as to make the pro formas
conservative - answer False
The greater detail in a pro forma, the greater its accuracy will be - answer
False
The qualitative portion of a financial analysis is analogous to the
hypothesis-forming state of scientific investigation because - answer
assumptions not tested till numbers are run, false assumption may be
formed, empirical measurement performed later
During the qualitative portion of developing pro formas, - answer
industry-wide considerations may be less important than company-specific
issues
An assumption is critical if - answer it affections the bottom line greater
than other assumptions, it reflects a judgement about the firm's ability to
perform one of the keys to success
Horizontal and vertical percentage trends are useful in projecting future
financial statements - answer True
,In a stable, predictable industry, an average of the precious ten years'
sales growth figures probably provides a more accurate forecast than
assuming the same level of sales next year as in the current year. - answer
True
When performing sensitivity analysis - answer statistical methods can be
usefully employed, electronic spreadsheets can save time, assumptions
should be changed one at a time
The final step in using pro formas is to - answer Compare the results of
the sensitivity analysis to the decision-maker's tolerance in the current
situation
The most accurate pro formas contain the most detail - answer false
In projecting an income statement based on a balance sheet, which of the
following categories would you contend to be least likely to vary directly
with a change in sales? - answer Depreciation
Hypothesis that are formed during the qualitative analysis can be verified
when the analyst reviews the firm's historical performance - answer True
Statistical methods can be employed to - answer smooth out historical
performance trends, aid the analyst in making estimates of future
performance, establish boundaries for sensitivity analysis
Sensitivity analysis should not be performed - answer on a predictable,
immaterial item
If projected assets exceed liabilities and OE, it is assumed that the
difference is funded through excess cash - answer False
What is the most compelling reason to project a firm's income statement
before projecting its balance sheet? - answer The change in retained
earnings is determined by net income and dividend payments, working
capital account balances are affected by sales levels
, When doing a comprehensive financial forecast, which account warrants
the most thorough relational and trend analysis? - answer Sales
The most significant difference between projecting balance sheets and
projecting cash flow is that - answer The cash flow statement shows the
periodic increase or decrease in the plug figure
Companies are concerned about shareholders' interests because - answer
firms like high share value, shareholders own the firm
As long as owners perceive that managers are creating value in the firm,
they are likely to hold on to their shares - answer True
Value is created in a firm through - answer Asset acquisition, which
improve earnings or efficiencies, capitalization decisions, the reduction of
operational and financial risks
A firm's dividend policy can usually be established independently of its
growth plans - answer False
Dividends are the sole source of returns for shareholders - answer false
It is likely that - answer prudent managers have a detailed knowledge of
the composition of their shareholders and mixing asset purchase and
financing decisions could cause managers to make poor decisions
Financial risk - answer is related to the amount of debit in a firm's
capitalization
Financial leverage raises a share's market value until - answer financial
risks outweighs the benefits
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