SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
Test your basic knowledge |
Advanced Financial Reporting And Analysis
Start Test
Study First
Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. CFO = NI - means high quality of earnings but may be affect by the stage of business cycle and firm's life cycle - CFO > NI - means premature recognition of revenue or delayed recognition of expenses.
CFO - Direct method
Sales Basis Revenue Recognitions
CFO Analysis...
Comprehensive income...
2. Under GAAP 1) Purchased patentes - copyrights - franchises - licenses - brands - and trademarks 2) Direct response advertising 3) Goodwill arising from transactions - (Proceeds - FMV net assets required = goodwill) 4) Software development costs once
Types of accounting changes...
Stock options: Use treasury stock method
The 4 Qualitative Characteristics of FASB...
Capitalized Intangibles...
3. GAAP: shown as a separate prepaid asset and amortized - IFRS: Deducted from proceeds and liability therefore effective interest rate is HIGHER under IFRS than GAAP.
Revaluation below historic cost...
Bond Issuance Cost under GAAP/IFRS
DTA Issues
Net Reporting of Revenue
4. Share are to ensure significant influence over the company - Affiliate/Associate - Equity Method
Discontinued Operations...
Extraordinary Items: Unusual AND Infrequent items...
Financial Implications of Capitalizing...
Intercorporate Investment: 20% - 50% votes...
5. Shows the financial position of a firm AT A SINGLE POINT in time A = L + E.
Balance Sheet
MD&A contains...
Funded status of the pension plan (under US GAAP & IFRS) is reported where?
Intercorporate Investment: < 20% votes...
6. 1) Increase comparability; 2) Reduce expense of overseas capital; 3) Reduce the expense of producing consolidated accounts
Asset Revaluation: IFRS
FASB - Harmonization
CFO Disclosure requirement...
IFRS: Required F/S
7. Is more relevant than book value: Recent changes allow more liability to be recorded at FMV (IFRS & GAAP require disclosure of FMV) - Downward adj. in liability will Increase equity and decrease leverage ratio - Upward adj in liability will decrease
Component depreciation;
Effects of Lease Classification on Ratios - Finance Lease
Low Quality Earnings is result of...
Analysis: Market Value of Debt
8. FIFO: EI = newest purchases - LIFO: EI = oldest purchases - Avg. Costs: EI = Available for sale/Units - Specific ID: high value items (cars - diamonds etc)
Net Periodic Benefit Costs
Inventory Cost Flow Methods...
IFRS/US GAAP Frameworks: Measurement of Elements...
Ending Inventory =
9. Days of sales o/s + days of inv. on hand - # of days payable (shorter the better)
IFRS: Required F/S
Dilutive Securities
Cash Conversion Cycle =
Antidilutive Securities
10. Aggressive Revenue Recognition - Diff. growth rates of operating cash flow and earnings - Abnormal comparative sales growth - Abnormal inventory growth as compared to sales - Moving nonoperating income and nonrecurring gains up to I/S to boost revenu
Impact on the Cash Flow of a Par Bond...
Warning Signs of Earnings Manipulation
Cash Flow: Logic (A = L + E)
Activity Ratios
11. Periodic: Inventory and COGS determined at p/e - Perpetual: Inv. & COGS updated for each sale (no purchase account need) - Cost flow method impact: FIFO = same for both - LIFO = different - Avg. cost = different - FIFO & LIFO relationship remain
Return on Equity (ROE)...
Types of accounting changes: accounting principle
Inventory Systems...
Disclosure for each segment...
12. 1) Intention to hold >1 year (e.g. debt or equity) valued @ cost or mkt value 2) Equity accounted investments
B/S - investments
Finance (capital) Lease criteria (under US GAAP)
Inventory Systems...
Lessor Accounting Capital Lease: Sales-Type Lease
13. Ineffective corp. ethical values; non-financial managers invovled in selection of accounting principles/estimates; History of violation; Focus on stock price and earning trends; Commitment to unrealistic/aggressive forecasts; Failure to correct known
MD&A contains...
ROE interpretation: if ROE is low...
Fraud Triangle - 3) Attitude/rationalization
Motivation to Overstate Assets/Understate Liabilities
14. EBIT/ Avg. total capital - Total capital includes: debt capital - so int. is aded back to NI
Sources of Differences betweent F/S & T/
Return on total capital (ROTC)...
Fraud Triangle - 1) Incentive/Pressure
IASB
15. Increase in an asset: deduct (use of cash) - Increase in a liability: add (source of cash) - Decrease in an asset: add (source of cash) - Decrease in a liability: deduct (use of cash)
Screening for Potential Equity Investment: Criteria
Types of accounting changes...
CFO - Direct/Indirect method
FIFO after-tax profit =
16. 1) is a contra asset account used to reduce the value of a DTA - 2) it is used to reduce the asset when future taxable income is deemed to be insefficient to fully use the DTA.
Vertical Common Size Statements...
Ending Inventory =
Valuation allowance
Operating vs. Non-operating Income
17. Nonreversal DTL - therefore it is permanent = Equity. therefore decrease in DTL = Increase in Equity - Reversal DTL - therefore it is temp = Liability
FIFO results in: (assuming inflationary period)
Taxation Analyst Adjustments...
The 4 Qualitative Characteristics of IFRS
Double-decline balance (DDB)
18. Exchange of goods or services between two parties (no cash) IASB: Revenue = FMV of similar non-barter transaction with unrelated parties FASB: Revenue = FMV only if the company has received cash payments for such services in the past
Intangibles under IFRS...
Cash Flow From Investing (USA) (Assets)
Implication for Analysts: Be aware of differences in tax reconcilation between periods
Barter (IASB & FASB)
19. Follows the traditional ledger account - assets on the left hand side and liabilities and equity on the right hand side.
The account format of B/S
IFRS/US GAAP Frameworks: objective of F/S
Valuation allowance
days of inv. on hand =
20. 1) Valuation; 2) Standard setting; 3) Measurement
Lessor Accounting Capital Lease: Sales-Type Lease
Barriers to a single framework...
Inventory mangement: High T/O (low DOH) and sales growth below industry average
BASIC EPS
21. 1) when differences are expected to REVERSE and reslut in future tax payment - treate DTL as a LIABILITY in calculating leverage ratios 2) when differences are NOT expected to REVERSE and result in future tax payment - treat DTL as EQUITY in calculat
Defined Benefit Plans
Analyst Treaments of DTL
Balance Sheet - formats
Segment Reporting
22. Diff. in depreciation methods/assumptions; Diff. in inventory methods/assumptions; Diff. in treatment of the effect of exchg rate chgs; Diff. in classifications of investment securities - Goodwill: Internally Generated DON'T capitalize - Purchased =
CFO - Direct/Indirect method
Income Tax Paid...
Financial Adj to Facilitate Comparison...
Defined Contribution Plans
23. Divdends and share repurchases - Production and investment - M&A - New debt issuance - Payoff pattern and liquidation priority - Maintenance of assets used as collateral
Activity Based Restrictions
Potentially Dillutive Securities
Deferred Tax Asset: (DTA)
Credit Rating Process...
24. Capital structure that contains NO potentially dillutive securities - (contains only c/s - nonconvertible debt - and nonconvertible pref. stock)
Inventory mangement: High T/O (low DOH) and sales growth below industry average
Simple capital structure
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
Defined Contribution Plans
25. All DTA and DTL are classified as noncurrent under IFRS - Under U.S. GAAP - deferred tax assets and liabilities are classified as current or non-current according to the classification of the underlying asset or liability. Under IFRS - deferred tax a
Ending Inventory =
Taxation Analyst Adjustments...
Low Quality Earnings is result of...
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
26. 1) Evaluating equity investments for a portfolio; 2) Evaluating potential M&A; 3) Evaluating a subsidiary of a parent company; 4) Deciding on private equity/ venture cap investment 5) Determine creditworthiness - borrowing; 6) Extending credit to
Impact on the B/S of a Zero Coupon Bond...
Activity Based Restrictions
Roles of financial reporting & analysis include...
Financial Ratio based on I/S...
27. 1) Purchase cost; 2) conversion costs; 3) Allocation of fixed production OH based on normal capacity levels; 4) Other costs necessary to bring the inventory to its present location and condition (freight costs & installation) - Exclude: Admin OH - S
Form 8-K...
Cost included in Inventory on b/s...
FIFO ending inventory =
Balance Sheet - formats
28. Employer promises specific payment stream at retirement - Payments are based on yrs of service - retirement age - and final salary - Employers bears investment risk - Funded by pool of assets - Complicated accounting
Defined Benefit Plans
Stock options: Use treasury stock method
Operating Risk Ratios...
IASB
29. Return on Total Equity = NI/ Avg. Total Equity - Return on C/E = NI - Pref. Div/ Avg. Common Equity
LIFO results in: (assuming inflationary period)
Return on Equity (ROE)...
The objective of f/s is to...
Gross Reporting of Revenue
30. Includes: cash flow from interst Rec'd and Paid - and Dividend received. Includes all income taxes paid.
Effects of Lease Classification on F/S - Finance Lease
Measurement of A & L disclosure in footnotes
Cash Flow From Operations (CFO) - FASB
Return on Equity (ROE)...
31. To improve liquidity and leverage ratios
CFO - Direct/Indirect method
Financial Liability: US GAAP/Fair Market Value
Cost included in Inventory on b/s...
Motivation to Overstate Assets/Understate Liabilities
32. For inventory that does not deteriorate with age.
Measures of Operating Performance - Efficiency Ratios...
days of inv. on hand =
Analyst Treaments of DTL
LIFO is appropriate
33. 1) Stretching A/P (increase in # days in payable) = 365/(AP T/O) = 365/(purchases/ Avg. AP)) 2) Financing payables (allows to great AP as CFF) 3) Securitizing A/are: (allows to recognize gains in I/S) 4) Income Tax Benefit from stock options 5) Buyba
Tax base of an asset
IFRS/US GAAP Frameworks: underlying assumptions...
Motivation to Understate Assets/Overstate Liabilities
Not all CF increase are Sustainable. Example of how Mgmt can Manipulate Cash Flow Statement
34. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality
Inv. Valuation reporting Inventory ABOVE costs...
Fraud Triangle - 1) Incentive/Pressure
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Steps of F/S Analysis
35. Int. Coverage = EBIT/Interest Expense - Fixed Charged Coverage = (EBIT+Lease Pymts) / Int. exp + Lease payments
Financial Ratios based on B/S: Solvency (Coverage)
Form 144...
Tax base on a liability
Balance Sheet - formats
36. Lost sales from stock outs
Straight-line depreciation (SL)
Sources of Differences: Temporary
Fraud Triangle - 1) Incentive/Pressure
Inventory mangement: High T/O (low DOH) and sales growth below industry average
37. Income Tax Expense > Taxes Payable - F/S > Tax Return - Pay less tax now but more on reversal
Deferred Tax Liability: (DTL)
FASB - Harmonization
Impact on the Cash Flow of a Discount Bond...
Complex Capital Structure
38. 1) Capitalize interst during construction period when building its own operating facility; 2) Interest must actually be paid by the firm; 3) Specific and general debt interest is capitalized
Return on total capital (ROTC)...
Capitalization of Interest...
Taxation: Income Tax Expense
IFRS/US GAAP Frameworks: underlying assumptions...
39. 1st: Net Income - dividends declared = chg in are/E - Then: Dividends declared +/- chg dividends payable = cash dividends paid.
Calculate dividends declared...
Effects of Lease Classification on F/S - Finance Lease
CFO - Direct/Indirect method
Intangible Assets
40. Companies must file this form to disclose material events including significant asset acquisitions and disposals - changes in management or corporate governance - or matters related to its accountants - financial statements - or the markets on which
FIFO ending inventory =
4 General Categories for Creditworthiness/Capacity...
Intangible Assets
Form 8-K...
41. Current Ratio (CA/CL): Higher - Work. Cap (CA -CL): Higher - Asset TO: (Sales/TA): Higher - ROA (EAT/TA): Higher - ROE (EAT/E): Higher - Debt/Equity: Lower - Understates Leverage ratios (b/c not recognized as a liability) - Overstates Coverage ratios
FASB - Harmonization
Effects of Lease Classification on Ratios - Operating Lease
B/S - Long-lived assets PP&E
Under Completed Contract Method...
42. Profit is recognized only when it exceeds estimated total cost.
CFO Disclosure requirement...
Cost recovery method...
Units of Production Method
The report format of B/S
43. 1) Responsibility to establish and maintain adequate internal controls 2) Mgmt's framework for evaluating internal controls 3) Assessment of the effectiveness of internal controls over the last operating period 4) Statement of auditor's attestment 5)
Comprehensive income...
Sarbanes-Oxley Management Report...
B/S - short-term investments
Free Cash Flow to Equity - FCFE
44. Income variability lower - Profitability early years (ROE - ROA & NI) is Higher - Profitability later years: lower - Total Cash Flows: Same - CFO: higher - CFI: Lower - Leverage ratios: D/E & D/A: lower - Opposite fore Expensing
Financial Implications of Capitalizing...
Effects of Lease Classification on F/S - Finance Lease
Impact on the Cash Flow of a Zero Coupon Bond...
B/S - investments
45. When Statutory tax rate does NOT equal Effective tax rate - Tax expense does note equal pretax income x statutory rate
Sources of Differences: Permanent
Intercorporate Investment: 20% - 50% votes...
Valuation Allowance...
Effects of Lease Classification on Ratios - Operating Lease
46. 365/(AR T/O) = 365/(Rev/Avg. AR)
Convergence IFRS/US GAAP...
Ratios that directly affect choice of Inventory Account...
Measurement of A & L disclosure in footnotes
days of sales o/s =
47. 1) Risk & Reward transferred; 2) No continued control; 3) Reliable measurement; 4) Probable flow of benefits; 5) Cost verifiable
FIFO ending inventory =
IFRS Revenue Recognition
From creditor POV: Int. Coverage;
Measures of Operating Performance - Efficiency Ratios...
48. US Gaap: lower of cost or market value - (does NOT allow subsequent reverasals) - IFRS: lower of cost or NET realizable value - (allows subsequent reversals)
Inventory Valuatoin (LCM)
Deferred Tax Asset: (DTA)
The report format of B/S
Analysis: Market Value of Debt
49. 1) Consider the growth rate and capital spending levels when determining whether temp diff due to accelerated depre will reverse 2) Look for cumulative differences due to asset impairments and post-retirement benefits 3) Restructuring charges can c
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
IFRS: Required F/S
Gain/(loss) on bond early retirement: (derecognition of debt)
Implication for Analysts: Be aware of differences in tax reconcilation between periods
50. + Service Costs (recurring costs (actual)) - + Interest Costs (recurring costs (actual)) - - Expected return on plan assets (smoothed event) - +/- Amort of (gains) and losses (smoothed event) - +/- Amort of prior service costs* (smoothed event) - +/-
FIFO ending inventory =
Net Periodic Benefit Costs
Impact on the B/S of a Zero Coupon Bond...
Discontinued Operations...
Sorry!:) No result found.
Can you answer 50 questions in 15 minutes?
Let me suggest you:
Browse all subjects
Browse all tests
Most popular tests
Major Subjects
Tests & Exams
AP
CLEP
DSST
GRE
SAT
GMAT
Certifications
CISSP go to https://www.isc2.org/
PMP
ITIL
RHCE
MCTS
More...
IT Skills
Android Programming
Data Modeling
Objective C Programming
Basic Python Programming
Adobe Illustrator
More...
Business Skills
Advertising Techniques
Business Accounting Basics
Business Strategy
Human Resource Management
Marketing Basics
More...
Soft Skills
Body Language
People Skills
Public Speaking
Persuasion
Job Hunting And Resumes
More...
Vocabulary
GRE Vocab
SAT Vocab
TOEFL Essential Vocab
Basic English Words For All
Global Words You Should Know
Business English
More...
Languages
AP German Vocab
AP Latin Vocab
SAT Subject Test: French
Italian Survival
Norwegian Survival
More...
Engineering
Audio Engineering
Computer Science Engineering
Aerospace Engineering
Chemical Engineering
Structural Engineering
More...
Health Sciences
Basic Nursing Skills
Health Science Language Fundamentals
Veterinary Technology Medical Language
Cardiology
Clinical Surgery
More...
English
Grammar Fundamentals
Literary And Rhetorical Vocab
Elements Of Style Vocab
Introduction To English Major
Complete Advanced Sentences
Literature
Homonyms
More...
Math
Algebra Formulas
Basic Arithmetic: Measurements
Metric Conversions
Geometric Properties
Important Math Facts
Number Sense Vocab
Business Math
More...
Other Major Subjects
Science
Economics
History
Law
Performing-arts
Cooking
Logic & Reasoning
Trivia
Browse all subjects
Browse all tests
Most popular tests