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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. 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.






2. 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.






3. 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






4. 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






5. If PV of min lease pymt < cost of asset 1) lessor is a dealer or seller of the leased equipment 2) at the time of lease inception - lessor recognized a gross profit on sale. (NI - are/E - and Assests are higher) 3) Interest rev recognized over period






6. 365/(AP T/O) = 365/(purchases/ Avg. AP)






7. Assets - liabilities - and equity are presented in a single column.






8. Assets: lower - Liabilities: lower - NI (Early yrs): higher - CFO: lower (b/c entire pymt is classed as CFO) - CFF: higher - Total CF: Same






9. (GAAP) Internally created intangibles 1) (R&D) are expensed 2) Advertising 3) Software (developed to establish feasibility)






10. Tax Rate down: DTL down -> Inc. Tax Exp down -> NI up - DTA down -> Inc. Tax Exp up -> NI down






11. All other liabilities (e.g. bonds - notes payables - leases)






12. I/S: COGS lower - EBT higher - Taxes: higher - NI: higher - B/S: INV: higher - W/C: higher - are/E: higher - CF: CFO: lower






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






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






15. PV of future obligation or the PV of the amount owed to employees for future pension benefits earned to date - Payments are determined based on expected final salary.






16. Interest Expense = Amortization






17. 1) Incentive/Pressure (the motive to commit fraud) 2) Opportunity (exists with weak internal controls) 3) Attitude/rationalization (mindset that fraud is justified)






18. US Gaap: lower of cost or market value - (does NOT allow subsequent reverasals) - IFRS: lower of cost or NET realizable value - (allows subsequent reversals)






19. 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 =






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






21. 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






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






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






24. 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






25. FASB & IASB -LT projects under contract - reliable estimates of revenue - cost and completion time -Rev - exp and profit are recognized in proportion to total cost incurred to date - divided by total expected cost.






26. Unlisted instruments - Held-to-maturity investments - Loans - Receivables






27. 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






28. 1) Balance Sheet; 2) Comprehensive Income; 3) Change in Equity; 4) Cash Flow Statement; 5) Accounting policies and notes.






29. Carrying amount of the liability minus the amount that will be deductible in the future.






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






31. Interest Expense = Coupon - Amortization = PV of future CF x market yield @ issuance






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






33. 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






34. 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






35. 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






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






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






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






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






40. Research = Expensed Development may be capitalized when the following critera is met: (ie if in the Development stage and NOT research stage) 1) process is clearly identified 2) Cost can be clearly idenfified 3) Technical feasibility established 4) M






41. 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






42. Amount deductible in future tax return






43. Reported BELOW the line. Operations mgmt has decided to dispose of but: 1) has not yet done so or 2) did so in CY after it generated profit/(loss) Must be physicallly and operationally distinct from firm. Analyst must determine effects on future inco






44. Shows the financial position of a firm AT A SINGLE POINT in time A = L + E.






45. 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






46. Any I/S subtotal is expressed a margin ratio (to revenues) - Gross profit margin = gross profit/ revenue - Net profit margin = Net Inc/revenue - Operating profit margin = EBIT/ revenue - Pre-tax margin = EBT/ revenue






47. 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






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






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






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






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