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






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






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






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






5. 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






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






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






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






9. 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.






10. 1) Firms adds a lease asset and a lease liability to b/s = amounts - 2) Recognize int. expense on liability and depreciation exp on asset - Since Int. exp + depre > lease pymt in the early years. This decreases NI - and Profitability ratios.






11. Income variability lower - Profitability early years (ROE - ROA & NI) is Higher - Profitability later years: lower - Total Cash Flows: Same - CFO: higher - CFI: Lower - Leverage ratios: D/E & D/A: lower - Opposite fore Expensing






12. ROE = (NI/EBT)x(EBT/EBIT)x(EBIT/Rev)x(Rev/Asset)x(Asset/Eqty) or (tax burden)x(int. burden)x(EBITmargin)x(Aset TO)x(Fin Lvg)






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






14. 1) B/S asset increased to FMV 2) Increase above original cost to equity via revaluation surplus account (comprehensive Income)






15. 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






16. IFRS: Funded status is NOT on B/S Asset/Liability - Result in a b/s that does NOT represent econ reality - GAAP: Funded status = B/S Asset/Liability -Both disclose components of DBO - plan assets - expenses - and assumptions used to calculate pensio






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






18. 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






19. NRV = Est. selling cost - Est. cost of complition - selling costs






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






21. Interest Expense = Amortization






22. LIFO after-tax profit + (change in LIFO reserve)(1 - t)






23. 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






24. Shows the performance of the company over a reporting period.






25. 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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26. 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






27. I/S: COGS lower - EBT higher - Taxes: higher - NI: higher - B/S: INV: higher - W/C: higher - are/E: higher - CF: CFO: lower






28. 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






29. 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






30. 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






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






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






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






34. 1)DTL - DTA - valuation allowance - Net ? in valutaion allowance over the period 2) unrecognized DTL or undistributed earning from subsidiaries & JVs 3) Current yr tax effect of each type of temp difference 4)Components of Inc Tax Expense 5)Tax loss






35. 1) understandability; 2) relevance; 3) reliability; and 4)comparability - No hierarchy






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






37. Int. Coverage = EBIT/Interest Expense - Fixed Charged Coverage = (EBIT+Lease Pymts) / Int. exp + Lease payments






38. All DTA and DTL are classified as noncurrent under IFRS - Under U.S. GAAP - deferred tax assets and liabilities are classified as current or non-current according to the classification of the underlying asset or liability. Under IFRS - deferred tax a






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






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






41. Contributed capital = c/s @ par plus add'l paid-in capital - Treasury stock (reaquired by frim but not yet retired) - are/E = Accum' NI less dividends - Minority (non-controlling) interest - Comprehensive income items: all chg in SOE not in I/S or fr

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42. 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






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






44. Securities that would INCREASE EPS if exercised






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






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






47. 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.]






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






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






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