Financial reporting and analysis are essential components of effective decision-making within any organization. It involves the systematic examination of a company’s financial statements, transactions, and economic indicators to assess its financial health and performance. Here are the top 10 frequently asked questions and answers that can provide valuable insights into this critical aspect of business:
Now, let’s move on to the Top 15 Financial Reporting & Analysis Question and Answer
Q1. The practice generally known as double taxation is due to
a. corporate income being taxed at both the federal and state levels.
b. corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.
c. shareholders’ dividends being taxed at both the federal and state levels.
d. interest on shareholders’ dividends being taxed as income.
Q2. Which of the following is an example of aligning managers’ personal interests with those of the owners?
a. Allow the managers to have as many perks as they request.
b. Pay the managers high salaries.
c. Trust the managers’ actions as they will always act in the owners’ best interest.
d. Offer the managers shares of common stock of the firm.
Q3. Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of capital returned to the investors?
c. None of these will reduce the amount of capital returned to the investors.
d. Retained earnings
Q4. From the perspective of access to capital, the best form of business organization is the _.
b. Limited Liability Partnership
d. Sole proprietorship
Q5. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow.
b. financial markets
c. financial asset
d. real asset
Q6. Financial management involves decisions about which of the following?
a. What type of capital should be raised
b. Which projects to fund
c. All of these
d. How to minimize taxation
Q7. Methods to minimize agency problem include all except ____.
a. Allow the CEO to purchase stock via an employee stock option plan
b. Award the CEO stock options
c. Allow the CEO to purchase bonds via an employee bond option plan
d. Offer the managers an equity stake in the firm
Q8. In the financial crisis that started in 2006, a significant indicator of the U.S. economic decline was:
a. a sharp increase in unregulated Ponzi-type security sales.
b. a significant drop in interest rates.
c. a large increase in loan default due to unemployment.
d. rising defaults by subprime mortgage borrowers.
Q9. For corporations, maximizing the value of owner’s equity can also be stated as
a. maximizing retained earnings.
b. maximizing net income.
c. maximizing the stock price.
d. maximizing earnings per share.
Q10. The portion of a company’s profits that are kept by the company rather than distributed to the stockholders as cash dividends is referred to as:
a. venture capital.
b. retained earnings.
c. institutional investment.
d. restricted earnings.