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. Beginning Inv. (BI) + Purchases (P) = Available for Sale - Available for sale - COGS = Ending Inventory (EI)
Steps of F/S Analysis
Impact on the Cash Flow of a Zero Coupon Bond...
Ending Inventory =
Roles of financial reporting & analysis include...
2. 1) fair presentation; 2) going concern; 3) accrual basis; 4) consistency; 5) materiality
Impact on the Cash Flow of a Zero Coupon Bond...
Fraud Triangle
Characteristics of an effective framework
Fundamental principles for PREPARING f/s under IFRS: (IAS No 10
3. 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 =
Disclosure for each segment...
Sales Basis Revenue Recognitions
Cost included in Inventory on b/s...
Financial Adj to Facilitate Comparison...
4. FIFO: EI = newest purchases - LIFO: EI = oldest purchases - Avg. Costs: EI = Available for sale/Units - Specific ID: high value items (cars - diamonds etc)
Common Size Statement
Inventory Cost Flow Methods...
CFO Disclosure requirement...
Net Periodic Benefit Costs
5. Both: Recognize going concern & accrual assumptions - IASB: Going concern & accruals given more prominence in framework - FASB: Going concern assumption not well developed in framework.
Effects of Lease Classification on Ratios - Operating Lease
Vertical Common Size Statements...
B/S - investments
IFRS/US GAAP Frameworks: underlying assumptions...
6. 1) Unqualified opinion (good); 2) Qualified opinion (followed GAAP except for...); 3) Adverse opinion (bad)
Auditor/Audit Opinion
Credit Analysis: Ratios
The best indicator of overstating its profits is...
Revaluation above historic cost...
7. 1) Aggregation where appropriate; 2) No offsetting assets against liabilities or income against exp.; 3) Classifed B/S; 4) Minimum Info on face; 5) Minimum disclosure; 6) Comparative info.
IFRS Revenue Recognition
IFRS: Presentation Requirements
Financial Ratio based on I/S...
B/S - short-term investments
8. 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.
Gain/(loss) on bond early retirement: (derecognition of debt)
Cash Flow From Investing (USA) (Assets)
Fraud Triangle - 1) Incentive/Pressure
CFO Analysis...
9. Securities that would INCREASE EPS if exercised
Free Cash Flow to Equity - FCFE
Antidilutive Securities
FIFO after-tax profit =
Bond Issuance Cost under GAAP/IFRS
10. Higher share price - Lower borrowing cost - Higher incentive compensation
Types of accounting changes: accounting principle
Which set of accounting standards requires firms to disclose estimated amortization expense for the next five years on intangible assets?
Impairments recognition (GAAP)
Creative Cash Flows Accounting: Motivation
11. NI/Avg. Total Assets - NI + Int (1-t) / Avg. Total Assets - Operating ROA: Operating INc/ Avg. Total Assets
Cash Conversion Cycle =
Cash Flow From Operations (CFO) - IFRS
Convergence IFRS/US GAAP...
Return on Assets ROA...
12. 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
CFI Analysis...
Impact on the Cash Flow of a Par Bond...
Impairments recognition (GAAP)
Valuation allowance
13. 1) Risk & Reward transferred; 2) No continued control; 3) Reliable measurement; 4) Probable flow of benefits; 5) Cost verifiable
Analyzing Effective Tax Rate Reconciliation
ROE interpretation: if ROE is low...
FIFO after-tax profit =
IFRS Revenue Recognition
14. 1) Incentive/Pressure (the motive to commit fraud) 2) Opportunity (exists with weak internal controls) 3) Attitude/rationalization (mindset that fraud is justified)
DTA/DTL: Effect on Net Income when Tax Rate decreases...
Fraud Triangle
The 4 Qualitative Characteristics of FASB...
Motivation to Over-report Earnings
15. 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
Effective Tax Rate
Net Reporting of Revenue
Impact on the Cash Flow of a Zero Coupon Bond...
B/S - Long-term Liabilities
16. Part of indenture that place restrictions on the firm that protect bondholderns and increase value of the firm's bond - Breach is technical default
Inventory mangement: High T/O (low DOH) and sales growth below industry average
Activity Ratios
Auditor/Audit Opinion
Debt covenants
17. 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
Cost recovery method...
IFRS/US GAAP Frameworks: purpose of framework
Discontinued Operations...
Financial Implications of Capitalizing...
18. 1) when differences are expected to REVERSE and reslut in future tax payment - treate DTL as a LIABILITY in calculating leverage ratios 2) when differences are NOT expected to REVERSE and result in future tax payment - treat DTL as EQUITY in calculat
Analyst Treaments of DTL
Forecasting Financial Performance: Top Down Approach...
Straight-line depreciation (SL)
Potentially Dillutive Securities
19. Derivatives - Non-derivative investments with fair value exposure hedged by derivatives
CFO - Indirect method steps...
Financial Liability: US GAAP/Fair Market Value
IFRS: Presentation Requirements
Sales Basis Revenue Recognitions
20. 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
ROE interpretation: if ROE is low...
Effects of Lease Classification on F/S - Finance Lease
Disclosure for each segment...
Stock options: Use treasury stock method
21. Assets - liabilities - and equity are presented in a single column.
Asset Revaluation: IFRS
Impact on the Cash Flow of a Discount Bond...
The report format of B/S
IFRS/US GAAP Frameworks: F/S elements...
22. 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:
Discontinued Operations...
CFO - Indirect method steps...
days of sales o/s =
Sources of Differences: Temporary
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
Funded Status US GAAP & IFRS
4 General Categories for Creditworthiness/Capacity...
FASB
IFRS/US GAAP Frameworks: purpose of framework
24. Follows the traditional ledger account - assets on the left hand side and liabilities and equity on the right hand side.
Diluted EPS
Funded Status US GAAP & IFRS
Vertical Common Size Statements...
The account format of B/S
25. Depreciation exp = (cost - residual value) x (# units produced / total expected to produce)
Common Size Statement
Intercorporate Investment: > 50% votes...
Effects of Lease Classification on F/S - Finance Lease
Units of Production Method
26. 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
Fraud Triangle - 3) Attitude/rationalization
Taxation: Income Tax Expense
Impact on the Cash Flow of a Discount Bond...
Traditional DuPont Equation...
27. I/S and B/S - Each line is relative to base year
Cash Conversion Cycle =
Analyst Treaments of DTL
Horizontal Common Size Statements...
Vertical Common Size Statements...
28. Funds from Operations to debt = NI adj for non cash items/ total debt - Free operating CF to Total Debt = CFO - Capex / total debt - Total Debt to EBITDA = total debt / EBITDA - Return on Capital = EBIT / Capital - Total debt to total debt + equity =
Fraud Triangle - 2) Opportunity
Types of accounting changes: accounting estimate
Amortization of Bond Premium = (in/out flow) in the indirect method CFO
Credit Analysis: Ratios
29. Shows the performance of the company over a reporting period.
Measurement of A & L disclosure in footnotes
IFRS Revenue Recognition
Income Statement
LIFO is appropriate
30. Securities that would DECREASE EPS if exercised - If X< Avg. stock price then could be exercised - If X> Avg. stock price then will not be exercised
Financial Assets: US GAAP/Amortized at Cost
Dilutive Securities
Types of accounting changes: accounting principle
Effects of Lease Classification on Ratios - Finance Lease
31. 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
Funded Status US GAAP & IFRS
MD&A contains...
FIFO is appropriate
Low Quality Earnings is result of...
32. A company can issue securities to certain qualified buyers without registering the securities with the SEC - but must notify the SEC that it intends to do so.
Operating vs. Non-operating Income
Forecasting Financial Performance: Top Down Approach...
Vertical Common Size Statements...
Form 144...
33. Shows the financial position of a firm AT A SINGLE POINT in time A = L + E.
Impact on the Cash Flow of a Par Bond...
Deferred Tax Asset: (DTA)
Balance Sheet
Intercorporate Investment: < 20% votes...
34. US Gaap: lower of cost or market value - (does NOT allow subsequent reverasals) - IFRS: lower of cost or NET realizable value - (allows subsequent reversals)
Tax base of an asset
The 4 Qualitative Characteristics of FASB...
Financial Lease Reporting
Inventory Valuatoin (LCM)
35. GAAP: more quantitative rules - IFRS: more qualitative approach based on whether the risks and reward of the asset have tranferred.
Revaluation above historic cost...
Finance (capital) Lease criteria GAAP vs. IFRS
Inventory mangement: High T/O (low DOH) and sales growth below industry average
Potentially Dillutive Securities
36. 1) Purpose and context 2) Data Collection 3) Data Processing 4) Analysis/Interpretation of data 5) Develop conclusions and recommendations 6) Follow-up
Steps of F/S Analysis
Dilutive Securities
Tax Loss Carryforward...
Convergence IFRS/US GAAP...
37. Share are to ensure significant influence over the company - Affiliate/Associate - Equity Method
Intercorporate Investment: 20% - 50% votes...
Financial Implications of Capitalizing...
Statement of Cash Flow - relevance...
Types of accounting changes...
38. Meet Analyst Expectations - Meet debt covenants - Incentive compensation
MD&A contains...
Form 8-K...
Motivation to Over-report Earnings
Creative Cash Flows Accounting: Motivation
39. GAAP: shown as a separate prepaid asset and amortized - IFRS: Deducted from proceeds and liability therefore effective interest rate is HIGHER under IFRS than GAAP.
Cash Flow From Financing (USA) (Source of Cash)
Tax base on a liability
ROE interpretation: if ROE is low...
Bond Issuance Cost under GAAP/IFRS
40. FASB: Asset is a future economic benefit - IASB: Asset is a RESOURCE from which future economic benefit is expected to flow.
Inventory mangement: High T/O (low DOH) and sales growth above industry average
IFRS/US GAAP Frameworks: F/S elements...
IFRS/US GAAP Frameworks: objective of F/S
Impact on the B/S of a Zero Coupon Bond...
41. 1) Nature of industry/entity operations: 3rd party transactions; Power of customer/supplier; Acct est subjective; Unusual transactions; International operations; International operations; Operations in tax havens. 2) Opportunity complex/unstable org.
FIFO is appropriate
Fraud Triangle - 2) Opportunity
Taxable Income
CFO Disclosure requirement...
42. 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
Impact on the B/S of a Par Bond...
Analysis: Market Value of Debt
Cash Flow From Operations (CFO) - IFRS
FIFO ending inventory =
43. 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
Installment Method...
IASB
Analyzing Effective Tax Rate Reconciliation
MD&A contains...
44. 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.
DTA/DTL: Effect on Net Income when Tax Rate decreases...
Convergence IFRS/US GAAP...
Installment Method...
Financial Lease Reporting
45. 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
Ending Inventory =
Straight-line depreciation (SL)
Creative Cash Flows Accounting: Technique
Segment Reporting
46. 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
B/S - short-term investments
Analyst Treaments of DTL
Unusual OR Infrequent items...
B/S - Stockholders' Equity
47. 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)
MD&A contains...
Impact on the B/S of a Premium Bond...
Measurement of A & L disclosure in footnotes
Sarbanes-Oxley Management Report...
48. 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
Measurement of A & L disclosure in footnotes
Cost recovery method...
Form 8-K...
Income Tax Paid...
49. Under GAAP 1) Purchased patentes - copyrights - franchises - licenses - brands - and trademarks 2) Direct response advertising 3) Goodwill arising from transactions - (Proceeds - FMV net assets required = goodwill) 4) Software development costs once
Motivation to Overstate Assets/Understate Liabilities
Capitalized Intangibles...
Tax Loss Carryforward...
Financial Implications of Capitalizing...
50. 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
Warning
: Invalid argument supplied for foreach() in
/var/www/html/basicversity.com/show_quiz.php
on line
183