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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. 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






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






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






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






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






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






7. Means that at least ONE of the following is true: Company has poor profit margin; Company has poor asset TO; Company is underleveraged






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






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






10. 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






11. Income subject to tax as per Tax Return






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






13. FASB: No discussion of 'probables' - IASB: Asset - liabilities - are probable flows






14. EBIT/ *Gross Interest EBITDA/ *Gross Interest *(inc'd capitalized interest) - How many times is EBIT or EBITDA bigger than gross interest? Higher ratio is desired. Shows ability to cover int. payment






15. 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






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






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






18. Employer promises specific payment stream at retirement - Payments are based on yrs of service - retirement age - and final salary - Employers bears investment risk - Funded by pool of assets - Complicated accounting






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






20. 1) Stretching A/P (increase in # days in payable) = 365/(AP T/O) = 365/(purchases/ Avg. AP)) 2) Financing payables (allows to great AP as CFF) 3) Securitizing A/are: (allows to recognize gains in I/S) 4) Income Tax Benefit from stock options 5) Buyba






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






22. 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






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






24. Interest expense = Coupon rate






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. 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






27. Delay Supplier pymt: boost CFO; review days' sales in AP; Financing of payables: use N/P to pay off AP; manipulate timing of CFO; Securitization of A/are: accelerates appearance of collection - boosts CFO; Tax benefit of stock options: lower tax paid






28. ROE = (NI/Sales) x (Sales/Assets) x (Assets/Equity) or ROE= Net Profit Margin x Asset TO x Leverage Ratio






29. 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






30. Required by IFRS - Permited by US GAAP






31. 1) Meet CFO (strategy; industry overview - accounting policy) 2) Tour major facilities 3) Vote on analyst recommendations (bus.& fin. risk) 4) Monitor publicly distributed ratings






32. 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:






33. [net income - preferred dividends] + [convertible prf.dividends] + [convertible debt int.] (1-t) / (weighted avg. of c/s o/s) + (shares from conversion of conv. pfd. shares) + (shares from conversion of conv. debt) + (shares issuable from stock optio






34. 1) B/S asset increased to FMV 2) Increase above original cost to equity via revaluation surplus account (comprehensive Income)






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






36. Slow moving or obsolete inventory






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






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






39. If PV of min lease pymt = cost of asset 1) lessor is not a dealer of leased equipment (fin. co.)2) no gross profit is recognized at time of lease inception 3) all profit is int. revenue recognized over period of lease. CFO = Int. Income inflow - CFI






40. 1) Consider the growth rate and capital spending levels when determining whether temp diff due to accelerated depre will reverse 2) Look for cumulative differences due to asset impairments and post-retirement benefits 3) Restructuring charges can c






41. Aggressive Revenue Recognition - Diff. growth rates of operating cash flow and earnings - Abnormal comparative sales growth - Abnormal inventory growth as compared to sales - Moving nonoperating income and nonrecurring gains up to I/S to boost revenu






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






43. I/S and B/S - Each line is relative to base year






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






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






46. 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






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






48. 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)






49. 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






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