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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. Same as other ratios using NI in this case substitut NI for CFO.






2. 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






3. 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






4. 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.






5. Cash Flow available for distribution to the c/s; after all obligations have been paid. CFO - fixed capital investment + net debt increase or CFO - net cap expenditure + net borrowings






6. 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






7. 1) Intention to hold >1 year (e.g. debt or equity) valued @ cost or mkt value 2) Equity accounted investments






8. 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






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






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






11. 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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12. 1) Unqualified opinion (good); 2) Qualified opinion (followed GAAP except for...); 3) Adverse opinion (bad)






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






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






15. 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






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






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






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. 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)






20. Net income + non-cash charges - working cap investment






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






22. 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






23. Actual cash outflow for taxes paid during current period






24. 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






25. 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






26. 1) Incentive/Pressure (the motive to commit fraud) 2) Opportunity (exists with weak internal controls) 3) Attitude/rationalization (mindset that fraud is justified)






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






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






29. Nature of liability; Maturity dates; Stated and effective int. rates; Call and conversion features; covenants; security pledged as collateral; Amount of Debt maturity in each of the next 5 years; Fair value of o/s instrutments






30. Periodic: Inventory and COGS determined at p/e - Perpetual: Inv. & COGS updated for each sale (no purchase account need) - Cost flow method impact: FIFO = same for both - LIFO = different - Avg. cost = different - FIFO & LIFO relationship remain






31. Higher share price - Lower borrowing cost - Higher incentive compensation






32. 1) Purpose and context 2) Data Collection 3) Data Processing 4) Analysis/Interpretation of data 5) Develop conclusions and recommendations 6) Follow-up






33. 1) Show each item as a % of Net Revenue 2) Show each inflow as a % of total inflows 3) Show each outflow as a % of total outflow






34. 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)






35. Slow moving or obsolete inventory






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






37. Assess liquidity - solvency and financial flexibiliy






38. 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






39. 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






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






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






42. CFO: cash interest expense - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption






43. Meet Analyst Expectations - Meet debt covenants - Incentive compensation






44. CFO = NI - means high quality of earnings but may be affect by the stage of business cycle and firm's life cycle - CFO > NI - means premature recognition of revenue or delayed recognition of expenses.






45. Held for continuing use within the business (not for resale) 1) investment property; 2) Assets held for sale; 3) Natural resources; 4) PP&E






46. 1) 3rd party pressure: 1) analyst/institutional expectations; 2) need to obtain finance; 3) listing requirements; 4) Debt covenants; 5) Transactions 2) Directors' Financial Position: 1) Equity interest; 2) Stock options; 3) Personal debt guarantees.






47. 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.






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






49. 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






50. 365/(AP T/O) = 365/(purchases/ Avg. AP)







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