Fundamentals of Corporate Finance, 3e (Berk/DeMarzo/Harford) Chapter 2 Introduction to Financial Statement Analysis

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the United States, publicly traded companies can choose whether or not they wish to release periodic financial statements. Answer: FALSE 2) Financial statements are optional accounting reports i... ssued periodically by a firm which present information on the past performance of the firm, a summary of the firm's assets and the financing of those assets, and a prediction of the firm's future performance. Answer: FALSE 3) International Financial Reporting Standards are taking root throughout the world. However, it is unlikely that the U.S. will report according to IFRS before the second half of the twenty-first century. Answer: FALSE 4) What is the main reason that it is necessary for public companies to follow the rules and format set out in the Generally Accepted Accounting Principles (GAAP) when creating financial statements? A) It ensures that the market value of assets and debt are reported accurately. B) It ensures that information on the performance of public companies is reported on cash- basis accounting. C) It ensures that important budgetary information is not omitted. D) It makes it easier to compare the financial results of different firms. Answer: D 5) Which of the following best describes why a firm produces financial statements? A) to use as a tool when planning future investments within a firm B) to increase the intrinsic value of a firm C) to provide a means for interested outside parties such as creditors to obtain information about a firm, with an overview of the short- and long-term financial condition of a business D) to show the daily activities a firm has undertaken in the previous financial year, and what activities are planned for the near future Answer: C [Show More]

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