Sometimes I hear tutoring clients state in frustration that "test questions often have a good answer and then a better answer." What is actually the case is that test questions have an answer that SORTA works and an answer that ACTUALLY works. Let's take a look at what you'll encounter at the exam center:
To determine how gross margins may have affected net margins, an investor using fundamental analysis techniques would examine the corporation's
A) balance sheet
B) income statement
DISCUSSION: We can rule out "1041," a tax form used by trusts and estates. We can rule out "balance sheet," too, as that is a static snapshot showing financial strength in terms of assets and liabilities. The results of operations over the quarter or the year are found on the income statement. Yes, but the income statement is also contained in an 8K! Therefore, there are 2 RIGHT ANSWERS!!!
Maybe not. Even if we cling to "8K" as an answer, what is our answer based on--the fact that we would open up the 8K for only one reason--to look at the income statement.
Upon further review, we see that the two answers are not equal. 8K kinda/sorta works, while income statement closes the deal, without question.
A good question will force you to think a while--which is okay, since you are entering a thinking person's profession. Good luck out there, people!
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