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. 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
Cash Conversion Cycle =
CFO - Indirect method steps...
Double-decline balance (DDB)
Expensed Intangibles...
2. Shows only the difference between sales and cost of goods sold Users are usually: 1) internet-based merchandising companies; 2) Sell prodict but never hold inventory; 3) Arrangement for supplier to ship directly to end customer. Discolsure policies
Statement of Cash Flow - relevance...
Extended DuPont Equation...
Gross Reporting of Revenue
Net Reporting of Revenue
3. Increasing CFI - may indicate growth OR Decreasing CFI or sell capital assets to conserve or generate cash.May result in higher outflows in the future as older assets are replaced or growth conts.
Financial Ratios based on B/S: Solvency (Coverage)
Under Completed Contract Method...
FASB
CFI Analysis...
4. 365/(AP T/O) = 365/(purchases/ Avg. AP)
Vertical Common Size Statements...
days of inv. on hand =
# of days payable =
Cash Flow From Investing (USA) (Assets)
5. 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
Expensed Intangibles...
LIFO results in: (assuming inflationary period)
Analyzing Effective Tax Rate Reconciliation
Effects of Lease Classification on F/S - Finance Lease
6. (GAAP) Internally created intangibles 1) (R&D) are expensed 2) Advertising 3) Software (developed to establish feasibility)
Expensed Intangibles...
days of inv. on hand =
B/S - Long-lived assets
Inventory Cost Flow Methods...
7. It is the purchase of an asset using debt finance.
What is the economic substance of financial (capital) lease?
Disclosure for each segment...
Inventory mangement: High T/O (low DOH) and sales growth below industry average
Balance Sheet
8. If PV of min lease pymt = cost of asset 1) lessor is not a dealer of leased equipment (fin. co.)2) no gross profit is recognized at time of lease inception 3) all profit is int. revenue recognized over period of lease. CFO = Int. Income inflow - CFI
Defined Benefit Plans
Sarbanes-Oxley Management Report...
Lessor Accounting Capital Lease: Sales: Direct Financing Lease
Inv. Valuation reporting Inventory ABOVE costs...
9. Primary) Relevance & Reliability - Secondary) Comparability - Lastly) Understandability - user specific
Taxable Income
Asset Capitalization
The 4 Qualitative Characteristics of FASB...
Lessor Accounting Capital Lease: Sales: Direct Financing Lease
10. 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
IASB - Goals
Return on Assets ROA...
Financial Ratios based on B/S: Solvency ratio
Effective Tax Rate
11. Interest expense = Coupon rate
Impact on the B/S of a Par Bond...
Motivation to Overstate Assets/Understate Liabilities
Cost recovery method...
Taxation Disclosure Requirements
12. 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
Warning
: Invalid argument supplied for foreach() in
/var/www/html/basicversity.com/show_quiz.php
on line
183
13. Assets held for continuing usage in the business NOT for resale ( Invoice price - Sales Tax - Freight & Insurance - and Installation costs) 1) capitalize costs that result in higher future earnings 2) expense costs that have uncertain/NO impact on fu
Debt covenants
Inventory Valuatoin (LCM)
Bond Issuance Cost under GAAP/IFRS
Asset Capitalization
14. Low: P/E - P/CF - or P/S - High: ROE - ROA - growth rates of sales and earnings - Low: leverage
Screening for Potential Equity Investment: Criteria
DTA/DTL: Effect on Net Income when Tax Rate decreases...
Which set of accounting standards requires firms to disclose estimated amortization expense for the next five years on intangible assets?
Asset Revaluation: IFRS
15. 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 =
Fraud Triangle - 1) Incentive/Pressure
Financial Adj to Facilitate Comparison...
Sales Basis Revenue Recognitions
DTA Issues
16. Tax Rate down: DTL down -> Inc. Tax Exp down -> NI up - DTA down -> Inc. Tax Exp up -> NI down
Funded Status US GAAP & IFRS
Lessor Accounting Capital Lease: Sales: Direct Financing Lease
DTA/DTL: Effect on Net Income when Tax Rate decreases...
Lessor Accounting Capital Lease: Sales-Type Lease
17. EBIT/ Avg. total capital - Total capital includes: debt capital - so int. is aded back to NI
Inventory mangement: High T/O (low DOH) and sales growth above industry average
Financial Lease Reporting
DBO Funded Status =
Return on total capital (ROTC)...
18. Income Tax Expense/Pretax Income (EBIT) Income Tax Exp. = Taxes payable + chg in deferred ta
IFRS Revenue Recognition
Effective Tax Rate
Asset Revaluation: IFRS
Return on Assets ROA...
19. 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
Effective Tax Rate
Intercorporate Investment: 20% - 50% votes...
Financial Lease Reporting
Common Size Statement
20. Assets: higher - Liabilities: Higher - NI (Early yrs): Lower - CFO: Higher (b/c only interest portion is classed as CFO) - CFF: Lower (b/c principal repayment portion) - Total CF: Same - Since Int. exp + depre > lease pymt in the early years. This de
Sarbanes-Oxley Management Report...
DTA Issues
Balance Sheet
Effects of Lease Classification on F/S - Finance Lease
21. 1) Scale & Diversification - 2) Operational Efficiency - 3) Margin Stability - 4) Leverage
Taxation: Tax Payable
4 General Categories for Creditworthiness/Capacity...
Diluted EPS
Straight-line depreciation (SL)
22. When Statutory tax rate does NOT equal Effective tax rate - Tax expense does note equal pretax income x statutory rate
Traditional DuPont Equation...
Debt covenants
Sources of Differences: Permanent
Operating Lease
23. 1st: Net Income - dividends declared = chg in are/E - Then: Dividends declared +/- chg dividends payable = cash dividends paid.
Types of accounting changes: accounting estimate
Calculate dividends declared...
Finance (capital) Lease criteria GAAP vs. IFRS
Funded Status US GAAP & IFRS
24. Both: purpose is to assist development & revision of accting stds - IASB: Firms must consider framework if no std exists - FASB: No express requirement to consider framework
# of days payable =
IFRS/US GAAP Frameworks: purpose of framework
Tax Loss Carryforward...
Types of accounting changes: accounting principle
25. 1) Nature of industry/entity operations: 3rd party transactions; Power of customer/supplier; Acct est subjective; Unusual transactions; International operations; International operations; Operations in tax havens. 2) Opportunity complex/unstable org.
Fraud Triangle - 2) Opportunity
Impact on the Cash Flow of a Par Bond...
Cash flow ratios
Effects of Lease Classification on F/S - Finance Lease
26. 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.
Sarbanes-Oxley Management Report...
Sources of Differences betweent F/S & T/
Gross Reporting of Revenue
Inventory mangement: High T/O (low DOH) and sales growth below industry average
27. Efficient inventory managment
Bond Issuance Cost under GAAP/IFRS
Steps of F/S Analysis
Inventory mangement: High T/O (low DOH) and sales growth above industry average
Comprehensive income...
28. Share are to ensure significant influence over the company - Affiliate/Associate - Equity Method
Footnote Finance Liability Disclosure
Credit Analysis: Ratios
Impact on the B/S of a Par Bond...
Intercorporate Investment: 20% - 50% votes...
29. Higher share price - Lower borrowing cost - Higher incentive compensation
Financial Assets: US GAAP/Fair Market Value
Dilutive Securities
Creative Cash Flows Accounting: Motivation
Return on Assets ROA...
30. Nonreversal DTL - therefore it is permanent = Equity. therefore decrease in DTL = Increase in Equity - Reversal DTL - therefore it is temp = Liability
Add/ Sub changes to related b/s operating accounts
Forecasting Financial Performance: Top Down Approach...
Taxation Analyst Adjustments...
Motivation to Under-report Earnings
31. Income Tax Expense > Taxes Payable - F/S > Tax Return - Pay less tax now but more on reversal
Cost recovery method...
Footnote Finance Liability Disclosure
Deferred Tax Liability: (DTL)
Cash Flow From Financing (USA) (Source of Cash)
32. Refers to change in mgmt judgement Does NOT require restatement of prior pd earnings; Disclose in footnotes
Types of accounting changes: accounting estimate
Revaluation below historic cost...
Activity Ratios
Ratios that directly affect choice of Inventory Account...
33. 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
Dilutive Securities
3 C's for Credit Analysis...
Net Periodic Benefit Costs
Net Reporting of Revenue
34. Adjustments Involves erros or new accounting standards - Resate prior period - Disclose nature and effect on NI - Errors may indicate weakness in internal controls
Types of accounting changes: prior period adjustments
DTA Issues
Unusual OR Infrequent items...
IFRS Revenue Recognition For Service
35. '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
Cash Flow From Investing (USA) (Assets)
CFO Analysis...
Net Realizable Value (NRV) (IFRS)
Inventory Cost Flow Methods...
36. Slow moving or obsolete inventory
BASIC EPS
B/S - Long-lived assets
B/S - Stockholders' Equity
Inventory mangement: Low T/O (High DOH)...
37. 1) Character: Mgmt reputation and history of repayment 2) Collateral: ability to pledge specific collateral reduces lender risk 3) Capacity: ability to replay debt. requires LT view of firms prospect.
Warning
: Invalid argument supplied for foreach() in
/var/www/html/basicversity.com/show_quiz.php
on line
183
38. 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
Net Realizable Value (NRV) (IFRS)
Cost included in Inventory on b/s...
An Increase in the Valuation Allowance Account...
Sources of Differences: Temporary
39. FASB: No discussion of 'probables' - IASB: Asset - liabilities - are probable flows
Convergence IFRS/US GAAP...
Effects of Lease Classification on F/S - Finance Lease
IFRS/US GAAP Frameworks: Recognition of Elements...
Not all CF increase are Sustainable. Example of how Mgmt can Manipulate Cash Flow Statement
40. IAS 39 Marketable securities - IAS 2 Inventories (LIFO prohibited) - IAS 16 PP&E - JV (IFRS: proportional consolidation) - IAS 38 Intangibles - IAS 18 & 11 Contruction Contracts - Extraordinary Items: Prohibited in IFRS - Cash Flow Statement
FASB - Harmonization
Taxation Analyst Adjustments...
Revaluation below historic cost...
Convergence IFRS/US GAAP...
41. Assets - liabilities - and equity are presented in a single column.
4 General Categories for Creditworthiness/Capacity...
Reasons to Lease...
The report format of B/S
Return on Equity (ROE)...
42. 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.
Effects of Lease Classification on Ratios - Operating Lease
Sustainable Growth
% of Completion
IFRS/US GAAP Frameworks: Recognition of Elements...
43. G = (earnings Retention rate) x (ROE) - earnings retention rate = [1-(payout ratio)] - payout ratio = Common dividends/ NI - Pref. Div.
Funded Status US GAAP & IFRS
DTA/DTL: Effect on Net Income when Tax Rate decreases...
Sustainable Growth
CFO - Indirect method steps...
44. 1) installment sales (If collection is certain - rev is recognized at time of sale) 2) installment method: (if collection cannot be estimated) 3) cost recovery (if collectability is highly uncertain)
MD&A contains...
Cash flow ratios
IFRS/US GAAP Frameworks: underlying assumptions...
Sales Basis Revenue Recognitions
45. EU & US 1) Int'l Org. of Securities Commission; 2) Goal: uniform regulation; 3) Core objectives: Protecting investor - Fair - transparent - efficient markets - Reduction of systematic risk
Motivation to Under-report Earnings
From creditor POV: Int. Coverage;
IOSCO
IFRS: Required F/S
46. Income subject to tax as per Tax Return
B/S - investments
The 4 Qualitative Characteristics of IFRS
Revaluation below historic cost...
Taxable Income
47. Pd after more than 1 year - notes & bonds: at PV of future CF pymets - Capital leases - Provisions - Deferred tax
Net Periodic Benefit Costs
IFRS Revenue Recognition For Service
Amortization of Bond Discount = (in/out flow) in the indirect method CFO
B/S - Long-term Liabilities
48. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality
days of sales o/s =
Operating Risk Ratios...
Funded status of the pension plan (under US GAAP & IFRS) is reported where?
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
49. NRV = Est. selling cost - Est. cost of complition - selling costs
Forecasting Financial Performance: Top Down Approach...
Defined Benefit Plans
Antidilutive Securities
Net Realizable Value (NRV) (IFRS)
50. Assets: lower - Liabilities: lower - NI (Early yrs): higher - CFO: lower (b/c entire pymt is classed as CFO) - CFF: higher - Total CF: Same
CFI Analysis...
Effects of Lease Classification on F/S - Operating Lease
Impact on the B/S of a Par Bond...
# of days payable =