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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. More than a third of Maxwell's total sales go to its own consolidated subsidiaries High levels of related-party transactions are worrisome - particularly when those parties are not audited. But transactions within the company between subsidiaries con

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2. 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






3. +Cash rcvd from customer - +Cash dividends rcvd - +Cash interest rcvd - +Other cash income ((trading securities) - Payment to suppliers - Cash expenses (wages etc) - Cash interest paid - Cash taxes paid






4. 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






5. (GAAP) Internally created intangibles 1) (R&D) are expensed 2) Advertising 3) Software (developed to establish feasibility)






6. 2 step-process 1) Recoverability: carrying value > undiscounted CF from asset's use and disposal 2) Loss measurement: Loss is the excess of carrying value over the asset's fair market value or PV of cash flows - Loss reversal for held-for-use assets






7. Loss that could not be deducted on the tax return in current period but may be used to reduce taxable income and taxes payable in future (i.e. warranty)






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






9. 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)






10. 1) Revenue (external & internal) 2) Segment results (operating profit) 3) Carrying amount of segment asset4 4) Segment liabilities (IFRS) 5) Cost of PPE and intangibles acquired 6) Depreciation and Amort expenses 7) Other non-cash expense 8) Share of






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






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






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






15. 1) Unqualified opinion (good); 2) Qualified opinion (followed GAAP except for...); 3) Adverse opinion (bad)






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






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






18. 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






19. 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






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






21. Efficient inventory managment






22. EBIT/ *Gross Interest EBITDA/ *Gross Interest *(inc'd capitalized interest) - How many times is EBIT or EBITDA bigger than gross interest? Higher ratio is desired. Shows ability to cover int. payment






23. 1) Land @ cost; 2) Plant & building @ historic cost less accu'm depr; 3) Equipment @ historic cost less accu'm depr 4) Intangible assets @ historic cost less accu'm amort






24. 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






25. 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






26. 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






27. 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






28. 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






29. EBIT/ Avg. total capital - Total capital includes: debt capital - so int. is aded back to NI






30. 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)






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






32. Companies should not recognize revenue from barter transactions. The additional revenue is likely to improperly boost profits. While an unusually high sales-growth rate may indicate fraud - it could also indicate good management. It's a yellow flag -






33. Securities that would INCREASE EPS if exercised






34. Both: General agreement on objectives; focus on wide range of users - IASB: One objective for all users - FASB: Separate objectives for business entities and non-business entities.






35. Reported ABOVE the line 1) G/(L) from disposal of a business segment 2) G/(L) from sale of investment in subsidiary 3) Provisions for environmental remediation - impairments - write-offs - write-downs - restructuring.4) Integration expense for recent






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






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






38. Outflow - (bringing bond DOWN to par)






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






40. 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






41. Inflow - (bringing bond UP to par)






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






43. CFO: no impact - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption - CFO is lower (b/c no impact) and CFF is higher






44. US Gaap: lower of cost or market value - (does NOT allow subsequent reverasals) - IFRS: lower of cost or NET realizable value - (allows subsequent reversals)






45. 1) Responsibility to establish and maintain adequate internal controls 2) Mgmt's framework for evaluating internal controls 3) Assessment of the effectiveness of internal controls over the last operating period 4) Statement of auditor's attestment 5)






46. 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






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






48. 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






49. 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






50. 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 =