Credit analysts are likely to consider which of the following in making a rating
ID: 2703492 • Letter: C
Question
c. both business risk and financial risk
When screening for potential equity investments based on return on equity, to control risk, an analyst would
most likely to include a criterion that requires:
A. Positive net income
B. Negative net income C. Negative shareholders equity
One concern when screening for stocks eith low price to earning ratios is that companies with low P/Es may be financially
weak. What criterion might an analyst include to avoid inadvertently selecting weak companies
A. Net income less than zero B. Debt to total assets ratio below a certain cutoff point
C. Current year sales growth lower than prior year sales growth
when a database eliminates companies that cease to exist because of merger or bankruptcy, this can result in:
A. Look ahead bias B. Back - testing Bias C. Survivorship bias
In a comprehensive financial analysis, financial statement should be :
C. Adjusted for deferences in accounting standards, such as international financial reporting standards and US
generally accepted accounting principles. A. Used as reported without adjustment B. Adusted for differences in accounting standard, such as
international reporting standards and US and US generally accepted accounting principles
When comparing financial statements prepared under IFRS with those prepared under U.S GAAP, analyst may need
to make adjustments related to: A. Realized losses B. unrealized gains and losses for trading securities C.. unrealized gains and losses for availablefor sales securities
when comparing a US company that uses the last in, first out (LIFO) method of inventory with companies that prepares
their financial statementsunder international financial reporting standards (IFRS), analyst shoulld be aware that according to IFRS, the
LIFO method of inventory: A. Never Acceptable B. is always acceptable C. Is acceptable when applied to finished goods inventory only
Explanation / Answer
when a database eliminates companies that cease to exist because of merger or bankruptcy, this can result in:
B. Back - testing Bias
---------------------
when comparing a US company that uses the last in, first out (LIFO) method of inventory with companies that prepares heir financial statementsunder international financial reporting standards (IFRS), analyst shoulld be aware that according to IFRS
LIFO method of inventory:
---------------------
When comparing financial statements prepared under IFRS with those prepared under U.S GAAP, analyst may need to make adjustments related to
unrealized gains and losses for trading securities
---------------------
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