4. a) As an analyst, explain why a careful reading of the Notes to Financial Sta

Question

4. a) As an analyst, explain why a careful reading of the Notes to Financial Statements will disclose if a company is exaggerating revenues. (b) Explain how a low P/E multiple companies can accelerate its earnings growth and thus become perceived as a high-growth stock.

5. a) How does the use of common form income statements for a peer group allow the analyst to uncover capitalization abuses? (b) What is “restructuring,” and what is the dangerous trap that users of financial statements must avoid?

Explanation / Answer

4a) In the notes of the financial statements there will be items like contingent liabilities and also explanation regarding the long term debt and notes payable information will give more insights about the financial performance of the company .

4b)A company can have low P/E may be perceived by investors as stock not performing well it can become high growth stock by increasing its Earning per share by not issuing any dividends

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