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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.
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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. 1st: Net Income - dividends declared = chg in are/E - Then: Dividends declared +/- chg dividends payable = cash dividends paid.






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






3. Exchange of goods or services between two parties (no cash) IASB: Revenue = FMV of similar non-barter transaction with unrelated parties FASB: Revenue = FMV only if the company has received cash payments for such services in the past






4. Return on Total Equity = NI/ Avg. Total Equity - Return on C/E = NI - Pref. Div/ Avg. Common Equity






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






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






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






8. Securities that would INCREASE EPS if exercised






9. 1) Capitalize interst during construction period when building its own operating facility; 2) Interest must actually be paid by the firm; 3) Specific and general debt interest is capitalized






10. 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






11. 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






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






13. 1) Change in accounting principle; 2) Change in accounting estimate; 3) Prior period adjustments






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






15. Slow moving or obsolete inventory






16. 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






17. GAAP: more quantitative rules - IFRS: more qualitative approach based on whether the risks and reward of the asset have tranferred.






18. 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.






19. 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






20. 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






21. Any I/S subtotal is expressed a margin ratio (to revenues) - Gross profit margin = gross profit/ revenue - Net profit margin = Net Inc/revenue - Operating profit margin = EBIT/ revenue - Pre-tax margin = EBT/ revenue






22. 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)






23. 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.






24. Trade relief - Contingent consideration - Union concessions






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






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






28. 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






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






30. 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:






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






32. 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)






33. 1) Balance Sheet; 2) Comprehensive Income; 3) Change in Equity; 4) Cash Flow Statement; 5) Accounting policies and notes.






34. [net income - preferred dividends] + [convertible prf.dividends] + [convertible debt int.] (1-t) / (weighted avg. of c/s o/s) + (shares from conversion of conv. pfd. shares) + (shares from conversion of conv. debt) + (shares issuable from stock optio






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






36. 1) Meet CFO (strategy; industry overview - accounting policy) 2) Tour major facilities 3) Vote on analyst recommendations (bus.& fin. risk) 4) Monitor publicly distributed ratings






37. Actual cash outflow for taxes paid during current period






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






39. 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)






40. 1) Increase comparability; 2) Reduce expense of overseas capital; 3) Reduce the expense of producing consolidated accounts






41. 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.






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






43. 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.






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






45. FASB: Asset is a future economic benefit - IASB: Asset is a RESOURCE from which future economic benefit is expected to flow.






46. 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






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






48. Income subject to tax as per Tax Return






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






50. Change in equity from transactions from nonownership sources. Include: NI - chg in foreign currency translation adj. - chg in pension adj to funded status - chg unrealized gains/losses on derivatives contracts accounted for as hedges - chng in unrea







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