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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. Primary) Relevance & Reliability - Secondary) Comparability - Lastly) Understandability - user specific






2. Selecting accounting principles to distort results - Structuring transactions to achieve a desired outcome - Using aggressive or unrealistic estimates and assumptions - Exploiting the intent of the accounting principle






3. Assets - liabilities - and equity are presented in a single column.






4. Profit recognized is the proportion of cash collected x total expected profit Revenue = (COG provided to date/total COG to be provided) x total expected revenue






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






6. 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:






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






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






9. 1) Stretching A/P (increase in # days in payable) = 365/(AP T/O) = 365/(purchases/ Avg. AP)) 2) Financing payables (allows to great AP as CFF) 3) Securitizing A/are: (allows to recognize gains in I/S) 4) Income Tax Benefit from stock options 5) Buyba






10. 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






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






12. Beginning Inv. (BI) + Purchases (P) = Available for Sale - Available for sale - COGS = Ending Inventory (EI)






13. Both: Broadly consistent - lack fully developed concepts - FASB: Assets revaluations prohibited (except some financial instruments)






14. 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






15. 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.






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






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






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






20. Tax liability based on taxable income as per TAX Report/RETURN






21. 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)






22. 365/(AR T/O) = 365/(Rev/Avg. AR)






23. Securities that would INCREASE EPS if exercised






24. Nature of liability; Maturity dates; Stated and effective int. rates; Call and conversion features; covenants; security pledged as collateral; Amount of Debt maturity in each of the next 5 years; Fair value of o/s instrutments






25. Ineffective corp. ethical values; non-financial managers invovled in selection of accounting principles/estimates; History of violation; Focus on stock price and earning trends; Commitment to unrealistic/aggressive forecasts; Failure to correct known






26. A company can issue securities to certain qualified buyers without registering the securities with the SEC - but must notify the SEC that it intends to do so.






27. Timing differences (depreciations) - Permanent differences






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






29. Small investment for div/capital gains purpose - If Secondary market: Held-to-maturity: Debt securities co intend to hold to maturity; Carried at Amortized cost. Available-for-sale: Sold to satisfy Debt/Equity Needs; Currrent or non-current; B/S @ MV






30. 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.






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






32. Efficient inventory managment






33. To improve liquidity and leverage ratios






34. Cash collections less direct cash inputs less other cash outfllows






35. 1) Credit Scoring (CF Forecast) 2) Equity Investment screening (cutoff values)






36. Divdends and share repurchases - Production and investment - M&A - New debt issuance - Payoff pattern and liquidation priority - Maintenance of assets used as collateral






37. Slow moving or obsolete inventory






38. NI/Avg. Total Assets - NI + Int (1-t) / Avg. Total Assets - Operating ROA: Operating INc/ Avg. Total Assets






39. 1) will only benefit on reversal if there is sufficient taxable earnings 2) can only utilize loss carryforwards if we have future profits 3) If asset cannot be utilized in full it is reduced by a contra 'valuation allowance'. REDUCE DTA - REDUCE NI






40. Used when estimates of revenue or cost are unreliable or short-term contracts - (US GAAP only) Revenue - expense - and profit is recognized at completion (IFRS) Revenue is recognized to the extent of contract cost - cost are expensed when incureed






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






42. EU 1) Int'l Accounting Standards Board; 2) Unified int'l frameworks of accounting standards (IFRS); 3) Addopted by EU in 2005






43. 365/(Inv. T/O) = 365/( COGS/ Avg. Inv.)






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






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






46. You.S. GAAP






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






48. Current ratio = CA/CL - Quick/Acid test = (cash + mkt sec + AR)/CL - Cash ratio = (Cash + mkt sec)/ CL - Defensive interval = (cash + mkt sec + AR)/Daily Cash Exp - Liquidity is over current Liabilities






49. Income subject to tax as per Tax Return






50. 1) Evidence of an arrangement; 2) Completion of earnings process; 3) Price is determined or determinable; 4) Assurance of payment







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