Question #8 - Reading 13 Integration of Financial Statement Analysis Techniques

Reading: Reading 13 Integration of Financial Statement Analysis Techniques

PDF File: Reading 13 Integration of Financial Statement Analysis Techniques.pdf

Page: 5

Status: Correct

Correct Answer: B

Shared Context

- The aggregate accruals (in $M's) for SnapPrints and the accrual ratio for NetPhoto are closest to: A) 3,700 and −0.51%. B) 2,500 and −2.04%. C) −4,500 and −1.49%.

Question

Compared to aggregate accruals, the accrual ratio is especially useful when:

Answer Choices:

A. comparing across companies

B. comparing year-over-year accruals

C. the cash component is large

Explanation

accruals ratioBS = (NOAEND −NOABEG) (NOAEND + NOABEG)/2 accruals ratioBS = = −2.04% (48,500 −49,500) (48,500 + 49,500)/2 The accrual ratio presents accruals for the period as a proportion of average net operating assets. This ratio is especially useful for comparing accruals across companies.

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