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Advanced Financial Reporting And Analysis

Subject : business-skills
Instructions:
  • Answer 50 questions in 15 minutes.
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  • 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. 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






2. 1) Results of operations and discussions of trend; 2) Capital resources - liquidity - and cash flow trends; 3) General business overview based on known trends; 4) Effects of trends - events - and uncertainties; 5) Discontinued operations - extraordin






3. 1st: Net Income - dividends declared = chg in are/E - Then: Dividends declared +/- chg dividends payable = cash dividends paid.






4. Held for continuing use within the business (not for resale) 1) investment property; 2) Assets held for sale; 3) Natural resources; 4) PP&E






5. If any ONE out of the FOUR are met must be classifed as Financial Lease: 1) Title transfered to lessee at the end of lease; 2) Bargain purchase option at the end of the lease; 3) Lease period is at least 75% of asset's useful life; 4) The PV of least






6. Taxes payable + chg deferred Tax as per Financial Report






7. Cash Flow available for distribution to all investors (stockholders & debt holders) CFO + int(1-t) - fixed capital investment or [FCFF calculated from NI = NI + noncash charged + (Int exp(1-tax rate) - net cap investment - working capital invt.]






8. Is required under IFRS but not under GAAP






9. 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)






10. +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






11. 1) Incentive/Pressure (the motive to commit fraud) 2) Opportunity (exists with weak internal controls) 3) Attitude/rationalization (mindset that fraud is justified)






12. 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






13. Shows sales and cost of goods sold.Under GAAP: 1) must be primary obligor under the contract; 2) bear inventory and credit risk; 3) have the ability to choose its supplier; 4) have reasonable latitude to set the price.






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






15. '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






16. 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.






17. CV of Op. Inc = std dev. EBIT/ Mean EBIT - CV of Revenue: std. dev Rev/ mean Rev. - Operating Leverage = %chg in EBIT/ %chg in Sales






18. Inventory TO = COGS / Avg. Inventory - LIFO = Higher - FIFO = Lower - DOH = 365/(Inv. T/O) = 365/( COGS/ Avg. Inv.) - LIFO = lower days - FIFO = higher days - Gross Profit margin = Gross profit/ revenues - LIFO = lower - FIFO = higher






19. Income Tax Expense < Taxes Payable - F/S < Tax Return - Pay more tax now but more on reversal






20. Securities that would DECREASE EPS if exercised - If X< Avg. stock price then could be exercised - If X> Avg. stock price then will not be exercised






21. LT D-to-E = Total LT Debt / Total Equity - D-to-E = Total Debt / Total Equity - Financial leverage ratio = Total Assets/Total Equity - Total Debt Ratio = Total Debt / Total Asset - Debt-to-Capital = Total Debt/ Total Debt + SOE - All Solvency are ove






22. A: Increase = use cash (-) - Decrease = source cash (+) - L: Increase = source cash (+) - Decrease = use of cash (-) - E: Increase = source cash (+) - Decrease = use of cash (-)






23. 1) Meet CFO (strategy; industry overview - accounting policy) 2) Tour major facilities 3) Vote on analyst recommendations (bus.& fin. risk) 4) Monitor publicly distributed ratings






24. Refers to changes from one GAAP method or IFRS method to another IFRS & US GAAP require prior year data shown in f/s to be adjusted.






25. Improve ROA and Asset TO Ratios - Report higher aquisition goodwill






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






27. Fair Value of Plan Assets - Defined Benefit Obligation (DBO) - Fair Value > DBO: overfunded (asset on B/S - GAAP) - Fair Value < DBO: underfunded (liability on B/S - GAAP) - (Funded Status = Economic Position of Plan)






28. 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






29. All other liabilities (e.g. bonds - notes payables - leases)






30. Carrying amount of the liability minus the amount that will be deductible in the future.






31. 1) Outcome reliable: rev recognized by stage of completion 2) Outcome unreliable: revenue recognized but no profit (






32. Reported BELOW the line. Operations mgmt has decided to dispose of but: 1) has not yet done so or 2) did so in CY after it generated profit/(loss) Must be physicallly and operationally distinct from firm. Analyst must determine effects on future inco






33. Profit is recognized only when it exceeds estimated total cost.






34. Depreciation exp = (cost-residual value)/ useful life






35. Shares are to take over control - Subsidiary - Consolidate financials






36. For inventory that has a limited shelf life ex) Because the movies have a very limited shelf life and will greatly deteriorate in value with age - especially after the first year - FIFO is the most appropriate method of accounting for the movies for






37. 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






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






39. Pd after more than 1 year - notes & bonds: at PV of future CF pymets - Capital leases - Provisions - Deferred tax






40. Any I/S subtotal is expressed a margin ratio (to revenues) - Gross profit margin = gross profit/ revenue - Net profit margin = Net Inc/revenue - Operating profit margin = EBIT/ revenue - Pre-tax margin = EBT/ revenue






41. 1) Balance Sheet; 2) Comprehensive Income; 3) Change in Equity; 4) Cash Flow Statement; 5) Accounting policies and notes.






42. 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)






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






44. Trade relief - Contingent consideration - Union concessions






45. 1) Development of high quality - transparent and enforceable global standards; 2) Promote application of standards; 3) Take into account special needs (small & med entities & emerging markets); 4) Convergence of nat'l and int'l standards






46. Income Tax Expense > Taxes Payable - F/S > Tax Return - Pay less tax now but more on reversal






47. Net income + non-cash charges - working cap investment






48. 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)






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






50. Trading securities - Available-for-sale - Derivatives (standalone or embedded in non-derivative intrument) - Assets with fair value exposure hedged by derivatives