Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Can investors be confident that if the financial statements of different companiesare accurate and are prepared in accordance with GAAP, the data reported by onecompany will be comparable to the data provided by another?
Financial ratios are useful tools of financial analysis which allows the statement user to compare changes in the individual items of financial information. True or false?
What is the purpose of looking at financial ratios and other data as a financial analyst? What other ways can you do data analysis?
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- When analyzing financial statements, besides reviewing data year over year for comparisons, the analyst should also compare the data to the S&P 500 Group of answer choices True Falsearrow_forwardA company can use comparisons of its financial data to the data of other companies and industry averages to evaluate its position. Group of answer choices True Falsearrow_forwardDiscuss areas where information asymmetry is a problem in financial markets, identifying the problems caused by it and the actions that can be taken to minimise the effects of information asymmetryarrow_forward
- Maines and Wahlen94 state in their research paper on the reliability of accounting information: “Accrual estimates require judgment and discretion, which some firms under certain incentive conditions will exploit to report non-neutral accruals estimates within GAAP. Accounting standards can enhance the information in accrual estimates by linking them to the underlying economic constructs they portray.” Explain what the authors meant by this statement with respect to the possible existence of earnings management.arrow_forwardWhich of the following is the least independent piece of information to collect about a company that is a potential M&A target? A. Internal audits B. Fun and Bradstreet reports C. Audited financial statements D. Relevant macroeconomics outlooks from an independent research organizationarrow_forwardWhich of the following is the best description of reliability in relation to information in financial statements? Comprehensibility to users Influence on the economic decisions Freedom from material error and bias Inclusion of degree of caution of usersarrow_forward
- factor that could explain why the falsifying of financial statements is occurring so frequently.arrow_forwardRatio analysis involves calculations that use the data from the financial statements to evaluate the performance of companies in different key areas. How would this information be used by a credit analyst as compared to someone is going to make an investment decision?arrow_forwardWhy is it important to identify your internal or external key stakeholder of the financial data?arrow_forward
- The metrics based on nonfinancial information are known as ______. A. quantitative factors B. qualitative factors C. stakeholders D. stockholdersarrow_forwardDiscuss the tendency of ratios to fluctuate over time (which may or may not beproblematic), explain how they can be influenced by accounting practices aswell as other factors, and explain why they must be used with care.arrow_forwardExplain why the comparison of financial ratios may be more meaningful than thecomparison of figures straight from the financial statementsarrow_forward
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