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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. Amount deductible in future tax return






2. For inventory that does not deteriorate with age.






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






4. 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






5. 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)






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






7. 1) Account format (A on left and L & E on right) 2) Report format ( A - L - E presented in one column) 3) Classified B/S (ordered)






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






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






10. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality






11. Asset is impaired if carrying value > recoverable amount - One-step process 1) Compare carrying value to: recoverable amount = the greater of the two. a) Fair value - selling costs b) Value in use = (PV of future cash flow from cont. use) - Loss reve






12. 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






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






14. 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






15. + 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) - +/-






16. 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 =






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






18. 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






19. It is the purchase of an asset using debt finance.






20. CFO: cash interest expense - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption






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






22. G = (earnings Retention rate) x (ROE) - earnings retention rate = [1-(payout ratio)] - payout ratio = Common dividends/ NI - Pref. Div.






23. 365/(AR T/O) = 365/(Rev/Avg. AR)






24. 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






25. Efficient inventory managment






26. 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






27. 365/(Inv. T/O) = 365/( COGS/ Avg. Inv.)






28. 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






29. 365/(AP T/O) = 365/(purchases/ Avg. AP)






30. BV - cash paid = gain/(loss) + any unamortized issue costs (US only) = Gain/Loss on repurchase [I/S as continuing operations)






31. 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






32. PV of future obligation or the PV of the amount owed to employees for future pension benefits earned to date - Payments are determined based on expected final salary.






33. 1) if 50% of its revenue is earned externally 2) if a business area has at least 10% of a firm's: Revenue; or Operating profit; or Use of asset 3) Business and geographical segments






34. 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.

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






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






37. Capital structure that contains NO potentially dillutive securities - (contains only c/s - nonconvertible debt - and nonconvertible pref. stock)






38. Financial Services Companies: Operating activities: Interest - Dividends - G/(L) on disposal Non-Financial Services Companies: Non-operating activities: Interest - Dividends - G/(L) on disposal






39. 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






40. Refers to change in mgmt judgement Does NOT require restatement of prior pd earnings; Disclose in footnotes






41. 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)






42. Funds from Operations to debt = NI adj for non cash items/ total debt - Free operating CF to Total Debt = CFO - Capex / total debt - Total Debt to EBITDA = total debt / EBITDA - Return on Capital = EBIT / Capital - Total debt to total debt + equity =






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






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






45. 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






46. When Statutory tax rate does NOT equal Effective tax rate - Tax expense does note equal pretax income x statutory rate






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






48. Trade relief - Contingent consideration - Union concessions






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






50. 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