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Advanced Financial Reporting And Analysis

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: no impact - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption - CFO is lower (b/c no impact) and CFF is higher






2. 1) Show each item as a % of Net Revenue 2) Show each inflow as a % of total inflows 3) Show each outflow as a % of total outflow






3. Replacement cost subject to: Upper limit = NRV - Loewr limit = NRV - normal profit margin






4. Current Ratio (CA/CL): lower - Work. Cap (CA -CL): Lower - Asset TO: (Sales/TA): Lower - ROA (EAT/TA): Lower - ROE (EAT/E): Lower - Debt/Equity: Higher - Since Int. exp + depre > lease pymt in the early years. This decreases NI - and Profitability ra






5. Off B/S asset or liability = Footnotes disclosure - Lease payments are expensed when due via I/S - Payments are CFO outflows






6. 1) Change in accounting principle; 2) Change in accounting estimate; 3) Prior period adjustments






7. Tax Rate down: DTL down -> Inc. Tax Exp down -> NI up - DTA down -> Inc. Tax Exp up -> NI down






8. Employer contributes specific % - No guarantee on future benefits - Employee bears investment risk - Pension expense = employer contribution






9. Efficient inventory managment






10. Is required under IFRS but not under GAAP






11. If PV of min lease pymt < cost of asset 1) lessor is a dealer or seller of the leased equipment 2) at the time of lease inception - lessor recognized a gross profit on sale. (NI - are/E - and Assests are higher) 3) Interest rev recognized over period






12. +Cash rcvd from customer - +Cash dividends rcvd - +Cash interest rcvd - +Other cash income ((trading securities) - Payment to suppliers - Cash expenses (wages etc) - Cash interest paid - Cash taxes paid






13. Working Capital = CA - CL - Working Capital TO = Rev/Avg. Working Capital - Fixed Asset TO = Rev/Avg Net Fixed Assets






14. FASB & IASB -LT projects under contract - reliable estimates of revenue - cost and completion time -Rev - exp and profit are recognized in proportion to total cost incurred to date - divided by total expected cost.






15. I/S: Income statement account/Sales - B/S: Balance sheet account/ Total Assets






16. Required by IFRS - Permited by US GAAP






17. 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






18. 1) B/S asset increased to FMV 2) Increase above original cost to equity via revaluation surplus account (comprehensive Income)






19. Interest Expense = Coupon - Amortization = PV of future CF x market yield @ issuance






20. 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






21. Nonreversal DTL - therefore it is permanent = Equity. therefore decrease in DTL = Increase in Equity - Reversal DTL - therefore it is temp = Liability






22. US Gaap: Balance Sheet - IFRS:Disclosed in Footnotes - May be mentioned in MD&A if mgnt considers it significant






23. Same as other ratios using NI in this case substitut NI for CFO.






24. 1st: Net Income - dividends declared = chg in are/E - Then: Dividends declared +/- chg dividends payable = cash dividends paid.






25. Outflow - (bringing bond DOWN to par)






26. Includes: cash flow from interst Rec'd and Paid - and Dividend received. Includes all income taxes paid.






27. CFO: cash interest expense - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption - CFO is lower CFF is higher






28. Days of sales o/s + days of inv. on hand - # of days payable (shorter the better)






29. When a company prepares a proxy statement for its shareholders prior to the annual meeting or other shareholder vote - it also files the statement with the SEC as Form DEF-14A.






30. Means that at least ONE of the following is true: Company has poor profit margin; Company has poor asset TO; Company is underleveraged






31. Depreciation exp = (cost - accum depre)/useful life x 2 - Does NOT use residual value but depreciation stops when residual value has been reached - reduce EBIT - NI - Assets - Equity and decrease ROA & ROE






32. Part of indenture that place restrictions on the firm that protect bondholderns and increase value of the firm's bond - Breach is technical default






33. 1) understandability; 2) relevance; 3) reliability; and 4)comparability - No hierarchy






34. It is Rare - but permitted for commodity producer/dealers B/S = NRV - I/S = unrealized gains/losses






35. EBIT/ *Gross Interest EBITDA/ *Gross Interest *(inc'd capitalized interest) - How many times is EBIT or EBITDA bigger than gross interest? Higher ratio is desired. Shows ability to cover int. payment






36. 1) Relevance vs. reliability; 2) Benefit > cost; 3) Excludes intangibles and non-quantifiable info.






37. GAAP: direct method must disclose adj to reconcile NI to CFO. reconciliation is NOT required for IFRS. IFRS: pymts for Int & Taxes MUST be disclosed separately in the CF Stmnt under direct or indirect. Under GAAP - this can be reported in CF stmnt or






38. Lost sales from stock outs






39. Contributed capital = c/s @ par plus add'l paid-in capital - Treasury stock (reaquired by frim but not yet retired) - are/E = Accum' NI less dividends - Minority (non-controlling) interest - Comprehensive income items: all chg in SOE not in I/S or fr

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40. 1) Scale & Diversification - 2) Operational Efficiency - 3) Margin Stability - 4) Leverage






41. Cash Flow available for distribution to the c/s; after all obligations have been paid. CFO - fixed capital investment + net debt increase or CFO - net cap expenditure + net borrowings






42. 1) Timing Differences: Accrual vs. modified cash accounting - Differences in reporting methods estimates






43. 'Assets' - Cash spent on long-term assets - Proceeds from the sale of long-term assets - Cash flow from investments in JVs - affiliates - and long-term investments in securities (trading securities are CFO) - [CFI = Cash additions - cash rcvd on disp






44. 1) Aggregation where appropriate; 2) No offsetting assets against liabilities or income against exp.; 3) Classifed B/S; 4) Minimum Info on face; 5) Minimum disclosure; 6) Comparative info.






45. 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






46. 365/(Inv. T/O) = 365/( COGS/ Avg. Inv.)






47. 1) 3rd party pressure: 1) analyst/institutional expectations; 2) need to obtain finance; 3) listing requirements; 4) Debt covenants; 5) Transactions 2) Directors' Financial Position: 1) Equity interest; 2) Stock options; 3) Personal debt guarantees.






48. = LIFO ending inventory + LIFO reserve FIFO after-tax profit






49. 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)






50. 1) Start with NI 2) Sub Gains or add losses from financing or investing CFs 3) Add non-cash charges (depr't & amort'z) & sub all non cash revenue 4) Add/ Sub changes to related b/s operating accounts: