The Second Step in Financial Statement Analysis Is to Identify

question 70

Multiple Choice

The second step in financial statement analysis is to identify the company strategy.Which of the following is a question an analyst should ask when performing a strategy analysis?

• A) Are industry sales growing rapidly or slowly?
• B) Do earnings include revenues that appear mismatched with the business model employed by the firm?
• C) Does the industry include a large number of firms selling similar products?
• D) What is the company's degree of geographical diversification?

---

Definitions:

Securities Exchange Act of 1934

A U.S. federal law governing the trading of securities in the secondary market, overseeing transactions, requiring disclosure, and aiming to prevent fraud.

Scienter

A legal term referring to the knowledge of wrongdoing, particularly the party's intent to deceive or act fraudulently in securities law.

GAAS

Generally Accepted Auditing Standards; guidelines for auditors in the conduct of financial audits.

GAAP

Stands for Generally Accepted Accounting Principles, which are a collection of commonly-followed accounting rules and standards for financial reporting.