1. Projections of future financial performance based on past results would be least reliable when a company:
A. is large and operating in a mature industry.
B. has just entered the industry.
C. is operating in a stable industry.
2. Company A classifies some financial assets as “available for sale”. Company B reports similar financial assets as “held for trading”. What adjustment should be made to Company A’s statements before comparing with the financial statements of Company B?
A. Realized gains and losses will be recognized in equity.
B. Unrealized gains and losses will be added to net income.
C. Unrealized gains and losses will be recognized in equity
3. If an analyst wants to keep risk low while screening for potential equity investments based on return on equity, which criteria is he most likely to use?
A. Low leverage ratio.
B. High leverage ratio.
C. Negative net income.
Tomorrow’s questions of the day will be on the topic of R35 Capital Budgeting.