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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. 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.






2. 1) Lack physical form (patent - copyrights etc; 2) Good will is an ex. of an unidentifiable intangible asset - not amortized but subject to annual impairment reviews; 3) Identifiable intangibles are amortized.(eliminate goodwill from ratio analysis)






3. LT D-to-E = Total LT Debt / Total Equity - D-to-E = Total Debt / Total Equity - Financial leverage ratio = Total Assets/Total Equity - Total Debt Ratio = Total Debt / Total Asset - Debt-to-Capital = Total Debt/ Total Debt + SOE - All Solvency are ove






4. Timing differences (depreciations) - Permanent differences






5. Divdends and share repurchases - Production and investment - M&A - New debt issuance - Payoff pattern and liquidation priority - Maintenance of assets used as collateral






6. 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






7. 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 =






8. Income Tax Expense/Pretax Income (EBIT) Income Tax Exp. = Taxes payable + chg in deferred ta






9. Slow moving or obsolete inventory






10. Lost sales from stock outs






11. 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






12. Working Capital = CA - CL - Working Capital TO = Rev/Avg. Working Capital - Fixed Asset TO = Rev/Avg Net Fixed Assets






13. 1) Cheaper Financing; 2) Reduce risk of obsolescence; 3) Less restrictive provisions; 4) Off-B/S reporting; 5) Tax Reporting Advantages (treated as ownership for tax ( deduct depreciation and interest expense)






14. Beginning Inv. (BI) + Purchases (P) = Available for Sale - Available for sale - COGS = Ending Inventory (EI)






15. 1) Results of operations and discussions of trend; 2) Capital resources - liquidity - and cash flow trends; 3) General business overview based on known trends; 4) Effects of trends - events - and uncertainties; 5) Discontinued operations - extraordin






16. 365/(AP T/O) = 365/(purchases/ Avg. AP)






17. FIFO: EI = newest purchases - LIFO: EI = oldest purchases - Avg. Costs: EI = Available for sale/Units - Specific ID: high value items (cars - diamonds etc)






18. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality






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






20. 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






21. Efficient inventory managment






22. 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






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






24. 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






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






26. 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:






27. 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.






28. Assess liquidity - solvency and financial flexibiliy






29. Follows the traditional ledger account - assets on the left hand side and liabilities and equity on the right hand side.






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






31. 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






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






33. Part of indenture that place restrictions on the firm that protect bondholderns and increase value of the firm's bond - Breach is technical default






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






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






36. Refers to change in mgmt judgement Does NOT require restatement of prior pd earnings; Disclose in footnotes






37. To improve liquidity and leverage ratios






38. Tax liability based on taxable income as per TAX Report/RETURN






39. Depreciation exp = (cost - residual value) x (# units produced / total expected to produce)






40. 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






41. 1) Forecast GDP 2) Regress industry sales against GDP 3) Forecast industry sales 4) Cosider changes to firm's mkt share 5) Forecast firms sales 6) Use hisoric margins for stable firms or forecast individual expense items 7) Remove non-recurring items






42. Depreciation exp = (cost-residual value)/ useful life






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. Companies must file this form to disclose material events including significant asset acquisitions and disposals - changes in management or corporate governance - or matters related to its accountants - financial statements - or the markets on which






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






46. Inflow - (bringing bond UP to par)






47. 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






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






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






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