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






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






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. 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






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






6. 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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7. 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)






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






9. Improve ROA and Asset TO Ratios - Report higher aquisition goodwill






10. 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






11. 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)






12. US 1) Financial Accounting Standards Board; 2) Standards form GAAP; 3) Aims - useful - relevant - reliable - consistent and comparable; 4) SEC deems FASB standard authoritative






13. Derivatives - Non-derivative investments with fair value exposure hedged by derivatives






14. 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






15. 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






16. Impairment is recorded on a Contra asset account - revalued below original cost means contra asset account is 0 1) B/S asset reduced to FMV 2) Loss take to I/S 3) Reversal of org. loss allowed I/S 4) Increase above org. cost to equity (comprehenive






17. 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






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






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






20. To improve liquidity and leverage ratios






21. 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






22. Outflow - (bringing bond DOWN to par)






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






24. 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






25. Timing differences (depreciations) - Permanent differences






26. Inflow - (bringing bond UP to par)






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






28. 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.






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






30. 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.






31. FIFO: EI = newest purchases - LIFO: EI = oldest purchases - Avg. Costs: EI = Available for sale/Units - Specific ID: high value items (cars - diamonds etc)






32. IFRS Allows firm to report PP&E at FMV less Accm' Depr' - Must disclose carrying vlaue using historic cost model.






33. 1) Risk & Reward transferred; 2) No continued control; 3) Reliable measurement; 4) Probable flow of benefits; 5) Cost verifiable






34. Interest Expense = Amortization






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






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






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






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






39. 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






40. If any ONE out of the FOUR are met must be classifed as Financial Lease: 1) Title transfered to lessee at the end of lease; 2) Bargain purchase option at the end of the lease; 3) Lease period is at least 75% of asset's useful life; 4) The PV of least






41. 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






42. LT D-to-E = Total LT Debt / Total Equity - D-to-E = Total Debt / Total Equity - Financial leverage ratio = Total Assets/Total Equity - Total Debt Ratio = Total Debt / Total Asset - Debt-to-Capital = Total Debt/ Total Debt + SOE - All Solvency are ove






43. Income Tax Expense/Pretax Income (EBIT) Income Tax Exp. = Taxes payable + chg in deferred ta






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






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






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






47. Lost sales from stock outs






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






49. Assess liquidity - solvency and financial flexibiliy






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