SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
Test your basic knowledge |
Advanced Financial Reporting And Analysis
Start Test
Study First
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. Profit is recognized only when it exceeds estimated total cost.
Dilutive Securities
IFRS/US GAAP Frameworks: underlying assumptions...
Cost recovery method...
Credit Rating Process...
2. Carrying amount of the liability minus the amount that will be deductible in the future.
Lessor Accounting Capital Lease: Sales-Type Lease
Deferred Tax Asset: (DTA)
IFRS/US GAAP Frameworks: purpose of framework
Tax base on a liability
3. Both: Broadly consistent - lack fully developed concepts - FASB: Assets revaluations prohibited (except some financial instruments)
Financial Ratios based on B/S: Solvency (Coverage)
IFRS/US GAAP Frameworks: Measurement of Elements...
Financial Implications of Capitalizing...
Reasons to Lease...
4. Share are to ensure significant influence over the company - Affiliate/Associate - Equity Method
Intercorporate Investment: 20% - 50% votes...
Financial Assets: US GAAP/Fair Market Value
Taxation Disclosure Requirements
Discontinued Operations...
5. Shows only the difference between sales and cost of goods sold Users are usually: 1) internet-based merchandising companies; 2) Sell prodict but never hold inventory; 3) Arrangement for supplier to ship directly to end customer. Discolsure policies
LIFO is appropriate
Traditional DuPont Equation...
Complex Capital Structure
Net Reporting of Revenue
6. Part of indenture that place restrictions on the firm that protect bondholderns and increase value of the firm's bond - Breach is technical default
Add/ Sub changes to related b/s operating accounts
Debt covenants
CFO - Direct method
Extraordinary Items: Unusual AND Infrequent items...
7. I/S: Income statement account/Sales - B/S: Balance sheet account/ Total Assets
Vertical Common Size Statements...
Capitalization of Interest...
Asset Capitalization
days of sales o/s =
8. NI/Avg. Total Assets - NI + Int (1-t) / Avg. Total Assets - Operating ROA: Operating INc/ Avg. Total Assets
Financial Ratio based on I/S...
Defined Contribution Plans
Return on Assets ROA...
Fraud Triangle - 3) Attitude/rationalization
9. 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.
Segment Reporting
Implication for Analysts: Be aware of differences in tax reconcilation between periods
Effects of Lease Classification on F/S - Finance Lease
Types of accounting changes: accounting principle
10. 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.
FIFO is appropriate
FASB
The account format of B/S
Financial Lease Reporting
11. 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
Financial Implications of Capitalizing...
Tax Loss Carryforward...
Sustainable Growth
Impact on the B/S of a Premium Bond...
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)
Effects of Lease Classification on F/S - Finance Lease
Extended DuPont Equation...
Auditor/Audit Opinion
Inventory Cost Flow Methods...
13. 1) Credit Scoring (CF Forecast) 2) Equity Investment screening (cutoff values)
Forecasting Financial Performance: Application
Effective Tax Rate
Return on Assets ROA...
Units of Production Method
14. 1) B/S asset increased to FMV 2) Increase above original cost to equity via revaluation surplus account (comprehensive Income)
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Bond Issuance Cost under GAAP/IFRS
Revaluation above historic cost...
Inventory mangement: Low T/O (High DOH)...
15. 1) if 50% of its revenue is earned externally 2) if a business area has at least 10% of a firm's: Revenue; or Operating profit; or Use of asset 3) Business and geographical segments
Segment Reporting
Balance Sheet - formats
Finance (capital) Lease criteria (under US GAAP)
Amortization of Bond Premium = (in/out flow) in the indirect method CFO
16. 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
Intercorporate Investment: 20% - 50% votes...
Funded Status US GAAP & IFRS
Form 144...
Measurement of A & L disclosure in footnotes
17. I/S and B/S - Each line is relative to base year
Measures of Operating Performance - Efficiency Ratios...
Depreciation Methods...
Sources of Differences: Permanent
Horizontal Common Size Statements...
18. 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
Return on total capital (ROTC)...
Which of the following characteristics should be of least concerned about management's opportunities to commit fraud?
Types of accounting changes...
Operating Risk Ratios...
19. NRV = Est. selling cost - Est. cost of complition - selling costs
Inventory mangement: Low T/O (High DOH)...
Component depreciation;
Disclosure for each segment...
Net Realizable Value (NRV) (IFRS)
20. Nonreversal DTL - therefore it is permanent = Equity. therefore decrease in DTL = Increase in Equity - Reversal DTL - therefore it is temp = Liability
Taxation Analyst Adjustments...
Deferred Tax Asset: (DTA)
Financial Ratios based on B/S: Solvency (Coverage)
Defined Benefit Obligations (DBO)
21. Interest Expense = Amortization
CFO - Indirect method steps...
Cash Flow: Logic (A = L + E)
Impact on the B/S of a Zero Coupon Bond...
Income Tax Paid...
22. LIFO after-tax profit + (change in LIFO reserve)(1 - t)
FIFO after-tax profit =
Capitalized Intangibles...
% of Completion
CFO Analysis...
23. 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
Free Cash Flow to Equity - FCFE
IFRS/US GAAP Frameworks: purpose of framework
Cost included in Inventory on b/s...
Not all CF increase are Sustainable. Example of how Mgmt can Manipulate Cash Flow Statement
24. Shows the performance of the company over a reporting period.
IFRS/US GAAP Frameworks: objective of F/S
Capitalization of Interest...
Analyst Treaments of DTL
Income Statement
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.
Warning
: Invalid argument supplied for foreach() in
/var/www/html/basicversity.com/show_quiz.php
on line
183
26. 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
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Impact on the Cash Flow of a Premium Bond...
DTA Issues
Cash Flow From Financing (USA) (Source of Cash)
27. I/S: COGS lower - EBT higher - Taxes: higher - NI: higher - B/S: INV: higher - W/C: higher - are/E: higher - CF: CFO: lower
Potentially Dillutive Securities
Add/ Sub changes to related b/s operating accounts
Steps of F/S Analysis
FIFO results in: (assuming inflationary period)
28. 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
Balance Sheet - formats
CFO Analysis...
IOSCO
IFRS/US GAAP Frameworks: F/S elements...
29. Assets: higher - Liabilities: Higher - NI (Early yrs): Lower - CFO: Higher (b/c only interest portion is classed as CFO) - CFF: Lower (b/c principal repayment portion) - Total CF: Same - Since Int. exp + depre > lease pymt in the early years. This de
Effects of Lease Classification on F/S - Finance Lease
Sarbanes-Oxley Management Report...
Return on Assets ROA...
Horizontal Common Size Statements...
30. 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
Barriers to a single framework...
Financial Ration based on B/S: Liquidity Ratios
Balance Sheet
Intercorporate Investment: > 50% votes...
31. Potentially dilutive securitites [options - warrants - convertible securities]
Financial Assets: US GAAP/Fair Market Value
Statement of Cash Flow - relevance...
Complex Capital Structure
Steps of F/S Analysis
32. Low: P/E - P/CF - or P/S - High: ROE - ROA - growth rates of sales and earnings - Low: leverage
FIFO results in: (assuming inflationary period)
DTA/DTL: Effect on Net Income when Tax Rate decreases...
Vertical Common Size Statements...
Screening for Potential Equity Investment: Criteria
33. Trading securities - Available-for-sale - Derivatives (standalone or embedded in non-derivative intrument) - Assets with fair value exposure hedged by derivatives
4 General Categories for Creditworthiness/Capacity...
An Increase in the Valuation Allowance Account...
Types of accounting changes: prior period adjustments
Financial Assets: US GAAP/Fair Market Value
34. 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
IFRS/US GAAP Frameworks: F/S elements...
Taxation Disclosure Requirements
Sustainable Growth
Tax base on a liability
35. 1) understandability; 2) relevance; 3) reliability; and 4)comparability - No hierarchy
The 4 Qualitative Characteristics of IFRS
# of days payable =
Balance Sheet - formats
Tax Loss Carryforward...
36. Stock options - Warrants - Convertible debt - Convertible preferred stock
Potentially Dillutive Securities
Fraud Triangle - 1) Incentive/Pressure
FIFO ending inventory =
Credit Analysis: Ratios
37. Int. Coverage = EBIT/Interest Expense - Fixed Charged Coverage = (EBIT+Lease Pymts) / Int. exp + Lease payments
Income Statement
Motivation to Understate Assets/Overstate Liabilities
Motivation to Under-report Earnings
Financial Ratios based on B/S: Solvency (Coverage)
38. 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
Steps of F/S Analysis
Potentially Dillutive Securities
One major difference between the presentation of deferred tax assets and liabilities under IFRS and under U.S. GAAP is that...
The 4 Qualitative Characteristics of FASB...
39. Income Tax Expense > Taxes Payable - F/S > Tax Return - Pay less tax now but more on reversal
IFRS/US GAAP Frameworks: purpose of framework
Double-decline balance (DDB)
Types of accounting changes: prior period adjustments
Deferred Tax Liability: (DTL)
40. Pd after more than 1 year - notes & bonds: at PV of future CF pymets - Capital leases - Provisions - Deferred tax
B/S - Long-term Liabilities
4 General Categories for Creditworthiness/Capacity...
Units of Production Method
Sources of Differences: Temporary
41. 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
Warning
: Invalid argument supplied for foreach() in
/var/www/html/basicversity.com/show_quiz.php
on line
183
42. For inventory that has a limited shelf life ex) Because the movies have a very limited shelf life and will greatly deteriorate in value with age - especially after the first year - FIFO is the most appropriate method of accounting for the movies for
FIFO is appropriate
Free Cash Flow to the Firm - FCFF
What is the economic substance of financial (capital) lease?
Cash Flow From Operations (CFO) - FASB
43. ROE = (NI/Sales) x (Sales/Assets) x (Assets/Equity) or ROE= Net Profit Margin x Asset TO x Leverage Ratio
% of Completion
Sources of Differences betweent F/S & T/
Traditional DuPont Equation...
Intangible Assets
44. Securities that would INCREASE EPS if exercised
Antidilutive Securities
Complex Capital Structure
Reasons to Lease...
Operating vs. Non-operating Income
45. 1) Relevance vs. reliability; 2) Benefit > cost; 3) Excludes intangibles and non-quantifiable info.
Trade-Offs Qualitative Characteristics of IFRS
Form 144...
Which of the following characteristics should be of least concerned about management's opportunities to commit fraud?
FASB - Harmonization
46. Income Tax Expense < Taxes Payable - F/S < Tax Return - Pay more tax now but more on reversal
Return on Equity (ROE)...
Disclosure for each segment...
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
Deferred Tax Asset: (DTA)
47. 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.]
Finance (capital) Lease criteria GAAP vs. IFRS
Free Cash Flow to the Firm - FCFF
Sources of Differences: Permanent
Barter (IASB & FASB)
48. Cash collections less direct cash inputs less other cash outfllows
B/S - Stockholders' Equity
Return on Assets ROA...
Horizontal Common Size Statements...
CFO - Direct method
49. Taxes payable + chg deferred Tax as per Financial Report
Taxation: Income Tax Expense
Return on Equity (ROE)...
Fraud Triangle - 1) Incentive/Pressure
Debt covenants
50. Financial Services Companies: Operating activities: Interest - Dividends - G/(L) on disposal Non-Financial Services Companies: Non-operating activities: Interest - Dividends - G/(L) on disposal
FIFO results in: (assuming inflationary period)
Impact on the Cash Flow of a Discount Bond...
Financial Ratios based on B/S: Solvency (Coverage)
Operating vs. Non-operating Income