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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. 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






2. 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






3. 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






4. 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.






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






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






7. 1) Outcome reliable: rev recognized by stage of completion 2) Outcome unreliable: revenue recognized but no profit (






8. 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






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






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






11. Timing differences (depreciations) - Permanent differences






12. CFO: cash interest expense - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption - CFO is higher and CFF is lower






13. 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.]






14. US Gaap: Balance Sheet - IFRS:Disclosed in Footnotes - May be mentioned in MD&A if mgnt considers it significant






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






16. Reported BELOW the line. Operations mgmt has decided to dispose of but: 1) has not yet done so or 2) did so in CY after it generated profit/(loss) Must be physicallly and operationally distinct from firm. Analyst must determine effects on future inco






17. 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






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






19. Shares are to take over control - Subsidiary - Consolidate financials






20. Efficient inventory managment






21. 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






22. Adjustments Involves erros or new accounting standards - Resate prior period - Disclose nature and effect on NI - Errors may indicate weakness in internal controls






23. 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






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






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.


26. A: Increase = use cash (-) - Decrease = source cash (+) - L: Increase = source cash (+) - Decrease = use of cash (-) - E: Increase = source cash (+) - Decrease = use of cash (-)






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






28. 1) is a contra asset account used to reduce the value of a DTA - 2) it is used to reduce the asset when future taxable income is deemed to be insefficient to fully use the DTA.






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






30. 1) Evaluating equity investments for a portfolio; 2) Evaluating potential M&A; 3) Evaluating a subsidiary of a parent company; 4) Deciding on private equity/ venture cap investment 5) Determine creditworthiness - borrowing; 6) Extending credit to






31. 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






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






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






34. 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






35. Interest Expense = Coupon - Amortization = PV of future CF x market yield @ issuance






36. 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.






37. 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






38. Contra asset account used to reduce DTA for probability that it will NOT be realized - Increase in valuation = decrease in DTA and NI - Decrease in valuation = increase in DTA and NI






39. 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






40. For inventory that does not deteriorate with age.






41. 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






42. 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.






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






44. Research = Expensed Development may be capitalized when the following critera is met: (ie if in the Development stage and NOT research stage) 1) process is clearly identified 2) Cost can be clearly idenfified 3) Technical feasibility established 4) M






45. 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.






46. 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






47. 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)






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






49. Assess liquidity - solvency and financial flexibiliy






50. 1) Basis for measurement; 2) carrying value of inventory by category; 3) Amount of inventory carried at FV less cost to sell 4) Write-downs & reversals (discussion of circumstance that led to reversal); 5) Inventories pledged as collateral for liabil