CFA Level I · CFA Level I Exam · Introduction to Financial Statement Analysis
An analyst compares a company's reported results with those of its peers and finds that its receivables are growing much faster than its sales. Which role of financial statement analysis is the analyst most likely performing?
The analyst is evaluating past performance and earnings quality. Comparing receivables growth with sales growth and with peers may reveal aggressive revenue recognition or collection problems. Dividend policy and statement preparation are management responsibilities, not analytical roles.
- AEvaluating the quality of earnings and the company's past performanceCorrect
- BSetting the company's dividend policy
- CPreparing the company's statutory financial statements
Explanation
Examining relationships such as receivables growth versus sales growth, and comparing with peers, is an evaluation of past performance and earnings quality. Setting dividend policy is a management decision and preparing statements is management's responsibility.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Financial Statement Analysis shows your real accuracy, how long you take and where you lose marks.
More Introduction to Financial Statement Analysis questions
- Which statement about an auditor's unmodified opinion on a company's financial statements is most accurate?
- An analyst reads an auditor's report that states the financial statements present fairly, in all material respects, the company's position i…
- In the financial statement analysis framework, the step an analyst performs immediately after collecting input data and before analyzing the…
- In the financial statement analysis framework, which activity most likely comes first in the process?
- Compared with a standard unqualified auditor's report, an auditor's report that includes a key audit matters section most likely:
- An analyst reads an unqualified audit opinion on a company's financial statements and concludes that the statements are free of any misstate…