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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.
  • 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. 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.






2. 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






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






4. 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






5. 1) Outcome reliable: rev recognized by stage of completion 2) Outcome unreliable: revenue recognized but no profit (






6. 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






7. Trade relief - Contingent consideration - Union concessions






8. 365/(AP T/O) = 365/(purchases/ Avg. AP)






9. 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






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






11. Depreciation exp = (cost - accum depre)/useful life x 2 - Does NOT use residual value but depreciation stops when residual value has been reached - reduce EBIT - NI - Assets - Equity and decrease ROA & ROE






12. 1) Revenue (external & internal) 2) Segment results (operating profit) 3) Carrying amount of segment asset4 4) Segment liabilities (IFRS) 5) Cost of PPE and intangibles acquired 6) Depreciation and Amort expenses 7) Other non-cash expense 8) Share of






13. It is the purchase of an asset using debt finance.






14. 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






15. 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.






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






17. Asset is impaired if carrying value > recoverable amount - One-step process 1) Compare carrying value to: recoverable amount = the greater of the two. a) Fair value - selling costs b) Value in use = (PV of future cash flow from cont. use) - Loss reve






18. Decreases DTA -> Decreases Net Income - [Decrease in Valuation Allowance; Increase DTA and Increases Net Income]






19. Adjustments Involves erros or new accounting standards - Resate prior period - Disclose nature and effect on NI - Errors may indicate weakness in internal controls






20. Actual cash outflow for taxes paid during current period






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






22. Inflow - (bringing bond UP to par)






23. CFO: cash interest expense - CFF: increased by amount rcvd at issuance and decreased by payment made at redemption - CFO is higher and CFF is lower






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






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.


26. 365/(AR T/O) = 365/(Rev/Avg. AR)






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






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






29. Selecting accounting principles to distort results - Structuring transactions to achieve a desired outcome - Using aggressive or unrealistic estimates and assumptions - Exploiting the intent of the accounting principle






30. Interest Rec'd - CFO/CFI Divs Rec'd - CFO/CFI Interst Paid - CFO/CFF Divs Paid - CFF/CFO Overdraft = cash - not CFF






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






32. 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.]






33. Current Ratio (CA/CL): Higher - Work. Cap (CA -CL): Higher - Asset TO: (Sales/TA): Higher - ROA (EAT/TA): Higher - ROE (EAT/E): Higher - Debt/Equity: Lower - Understates Leverage ratios (b/c not recognized as a liability) - Overstates Coverage ratios






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






35. G = (earnings Retention rate) x (ROE) - earnings retention rate = [1-(payout ratio)] - payout ratio = Common dividends/ NI - Pref. Div.






36. 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






37. Required by IFRS - Permited by US GAAP






38. 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






39. 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






40. +Cash rcvd from customer - +Cash dividends rcvd - +Cash interest rcvd - +Other cash income ((trading securities) - Payment to suppliers - Cash expenses (wages etc) - Cash interest paid - Cash taxes paid






41. 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






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






43. 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.






44. 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






45. 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






46. 1) Transparency; 2) Comprehensiveness; 3) Consistency






47. 1) Scale & Diversification - 2) Operational Efficiency - 3) Margin Stability - 4) Leverage






48. 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






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






50. 1) Calculate cash raised on exercise 2) Repurchase shares at avg. price 3) New Shares = exercised - repurchased