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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. 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






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






3. 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.






4. Delay Supplier pymt: boost CFO; review days' sales in AP; Financing of payables: use N/P to pay off AP; manipulate timing of CFO; Securitization of A/are: accelerates appearance of collection - boosts CFO; Tax benefit of stock options: lower tax paid






5. Lost sales from stock outs






6. Management turnover.






7. (net income - preferred dividends)/weighted average of common shares outstanding - only income from continuing operations is considered






8. Interest Expense = Coupon + Amortization = PV of future CF x market yield @ issuance






9. 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






10. 2 step-process 1) Recoverability: carrying value > undiscounted CF from asset's use and disposal 2) Loss measurement: Loss is the excess of carrying value over the asset's fair market value or PV of cash flows - Loss reversal for held-for-use assets






11. Stock options - Warrants - Convertible debt - Convertible preferred stock






12. Decreases DTA -> Decreases Net Income - [Decrease in Valuation Allowance; Increase DTA and Increases Net Income]






13. 1) Diff tax rate in diff. tax jurisdictions (countries) (continuous)2) Permanent tax differences: tax credit - tax-exempt income - nondeductible expenses - & tax diff between capital gains and operating income. (continuous) 3)in tax rates and legisl






14. 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.






15. More than a third of Maxwell's total sales go to its own consolidated subsidiaries High levels of related-party transactions are worrisome - particularly when those parties are not audited. But transactions within the company between subsidiaries con

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16. Unlisted instruments - Held-to-maturity investments - Loans - Receivables






17. Assets: lower - Liabilities: lower - NI (Early yrs): higher - CFO: lower (b/c entire pymt is classed as CFO) - CFF: higher - Total CF: Same






18. Interest expense = Coupon rate






19. Reported BELOW the line.Prohibited under IAS1 1) Losses from expropriation of assets. 2) Uninsured losses from natural disasters - Analyst must determine if it is really THAT extraordinary and if should be included in forecasting






20. Share are to ensure significant influence over the company - Affiliate/Associate - Equity Method






21. 365/(AR T/O) = 365/(Rev/Avg. AR)






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






23. Low: P/E - P/CF - or P/S - High: ROE - ROA - growth rates of sales and earnings - Low: leverage






24. 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






25. Change in equity from transactions from nonownership sources. Include: NI - chg in foreign currency translation adj. - chg in pension adj to funded status - chg unrealized gains/losses on derivatives contracts accounted for as hedges - chng in unrea






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






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






28. 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






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






30. Return on Total Equity = NI/ Avg. Total Equity - Return on C/E = NI - Pref. Div/ Avg. Common Equity






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






32. 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






33. 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.






34. I/S and B/S - Each line is relative to base year






35. Income subject to tax as per Tax Return






36. + 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) - +/-






37. Potentially dilutive securitites [options - warrants - convertible securities]






38. Total assets TO = Revenue/Avg. total asset - Fixed asset TO = Revenue/ Avg. net fixed assets - Working Cap TO = Revenue/Avg. working captial






39. Both: Recognize going concern & accrual assumptions - IASB: Going concern & accruals given more prominence in framework - FASB: Going concern assumption not well developed in framework.






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






41. (GAAP) Internally created intangibles 1) (R&D) are expensed 2) Advertising 3) Software (developed to establish feasibility)






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






43. 1) Transparency; 2) Comprehensiveness; 3) Consistency






44. 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.






45. 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






46. 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






47. 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.






48. 1) SL; 2) Double Decline balance (accelerated); 3) Units of production; 4) Tax code perscribed Modified Accelerated Cost Recovery System (MACRS)






49. 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






50. ROE = (NI/Sales) x (Sales/Assets) x (Assets/Equity) or ROE= Net Profit Margin x Asset TO x Leverage Ratio