Financial Reporting Test Answers



True or False? The notes to financial statements are additional information that is added to the beginning of the financial statements
False
True


True or False? Only businesses use financial reports.
True
False


Revenue - Expenses = what?
Cost of Sales
Sales Revenue
Gross Revenue
Net income


The cash flow statement details a firm's _________?
efficiency
liquidity
profitability


True or False? Financial reporting is a financial statement that is a proper documentation of the financial activities of a business.
True
False


The general formula for a balance sheet is
Assets = Liabilities * Equity
Assets = Liabilities + Equity
Assets = Liabilities - Equity
Assets = Liabilities / Equity


If the Net Present Value of a project is postive then __________?
the firm should not invest in the project
the firm should invest in the project
the firm should invest in more than one project


Which of the following is a current asset?
Property
Intangible Assets
Equipment
Accounts Receivable


The GAAP is comprised of:
cost principle
revenue recognition principle
matching principle
(All of these)


The balance sheet reports a company's assets, liabilities and what?
Profits
Revenue
Expense
Ownership Equity


Financial reports are filled out based on the:
Generally Accepted Accounting Principles
(None of these)
Direct write-off Accounting Principles


If a bond is trading at par, what is its face value?
102
100
99
101


True or False? Creditors use financial reports to make decisions on loans.
True
False


The single step income statement approach totals revenues and subtracts ________?
Expenses
Liabilities
Equity
Assets


True or False? A cash flow statement shows only the inflows of cash into the company.
True
False


The balance sheet is also referred to as what?
Profit & Loss Report
Statement of Revenue & Expense
Statement of Financial Position
Statement of Comprehensive Income


What does the SEC stand for?
Security Exchange Commission
Security Entitlement Commission
Standard Exchange Commission


An example of an SEC filing is a:
14J
17U
10K
10Z


Which of the following is an example of a non-current asset?
Property
Prepaid expenses
Cash
Accounts receivable


The full disclosure principle indicates...
that a company must declare its expenses and revenues together in the same period
when a company will record its revenue
when the cost of something matches up with the accounting information on the balance sheet
a company must disclose all pertininant information in regards to the financial statement which would affect an investor's decision


True or False? A personal financial statement is useful when trying to obtain a loan.
True
False


The Three Parts of the Cash Flow Statements include Operating, Investing and ______?
Purchasing
Financing
Borrowing
Amoritizating


Accrual Basis Accounting matches what?
Revenues and Expenses
Cash and Expenses
Cash and Revenues
Cash


What does it mean if a company has a negative EPS?
The company is making money
Cannot happen
The company is losing money


Financial reports are used to find:
EPS
(All of these)
PEG ratio
PE ratio


True of False? Financial statements need to be audited.
False
True


When are current liabilities due?
Within 6 months
Within one year
After one year
Within 3 months


Which is the correct accounting equation?
assets - liabilities = net worth
asset - net worth = liabilities
net worth - asset = liabilities
liabilities - net worth = asset


An example of a financial report is a:
17U
14J
10Q
20R


If a firm's payout ratio is greater than 1, the firm is __________?
paying more dividends out than they earned
paying less dividends out than they earned
not paying out any dividends


Which activity is represented first in the Cash Flow Statements?
Purchasing
Financing
Investing
Operating


What was the purpose of the Sarbanes-Oxley Act of 2002?
lower taxes on larger corporations
raise taxes on larger corporations
(None of these)
decrease fraudulent activity of businesses


True or False? The diluted earnings per share is a more reliable way to measure earnings per share.
False
True


True or false? Operating margin is a good tool when deciding to invest in a company.
False
True


Net profit margin =
Net Profit / Revenue
Net Profit / Expenses
Net Profit * Expenses
Net Profit * Margin


A firm with a low profit margin indicates __________________?
a lower risk that an increase in sales will erase profits and result in net loss
a higher risk that an increase in sales will erase profits and result in net loss
a lower risk that a decline in sales will erase profits and result in net loss
a higher risk that a decline in sales will erase profits and result in net loss


True or False? ROA stands for Return on Asset.
True
False


True or False? The balance sheet is a snapshot of a firm's financial position.
True
False


The matching principle is:
when a company will record its revenue
when the cost of something matches up with the accounting information on the balance sheet
when a company must disclose all pertininant information in regards to the financial statement which would affect an investor's decision
that a company must declare its expenses and revenues together in the same period


An item needed for financial reporting is:
income statement
(All of these)
cash flow statement
a balance sheet


What does the I stand for in EBITDA?
Income
Increase
Intangible
Interest


True or False? A form 8k is used to notify investors of some meaningful event arising.
False
True


Nowadays most financial statements can be found on
(All of these)
yahoo finance pages
google finance pages
the SEC website


True or False? Charitable organizations that are required to publish financial statements do not produce income statements. Instead they publish statement of activities.
True
False


True or False: The asset turnover ratio measure the firm's efficient use of its liabilities in generating sales income?
True
False


True or False? Financial reports are not important in making investment decisions.
False
True


How do you calculate market capitalization?
Share price / Number of shares outstanding
Number of shares outstanding * share price
Share price * total assets
Number of shares outstanding / share price


Who typically needs to approve a financial statement when they are a SEC filing?
lawyer
(None of these)
employee
accountant


True or False? Dividends appear on the income statement.
True
False


What are the three parts of a firm's balance sheet?
Assets, Loss, Profit
Liabilities, Equity, Profit
Assets, Liabilities, Equity
Loss, Profits, Equity


Which of the following is a general purpose financial report
shareholder reports
(All of these)
investor reports
annual reports


The SEC usually deals with:
private companies
(All of these)
(None of these)
public companies


Which form corresponds to an annual summary?
10Q
4k
10k
8k


The revenue recognition principle is:
that a company must declare its expenses and revenues together in the same period
when a company will record its revenue
when the cost of something matches up with the accounting information on the balance sheet
when a company must disclose all pertinent information in regards to the financial statement which would affect an investors decision


The cost principle is:
that a company must declare its expenses and revenues together in the same period
when a company will record its revenue
when the cost of something matches the accounting information on the balance sheet
when a company must disclose all pertininant information in regards to the financial statement which would affect an investors decision


True or False? Earnings per share do not include taxes for the year.
False
True


If the price per share of a company is $10 and and its EPS is $1, then what is its PE ratio?
0.1
10
100
(None of these)


Earnings per share = ?
(Net Income - Preferred Stock Dividends) / (Common Stock Shares Outstanding)
(Preferred Stock Dividends - Net Income) / (Weighted Average of Common Stock Shares Outstanding)
(Preferred Stock Dividends - Net Income) / (Common Stock Shares Outstanding)
(Net Income - Preferred Stock Dividends) / (Weighted Average of Common Stock Shares Outstanding)


A 10Q is a financial report for a company that is given
once a month
two times a year
once a year
four times a year


In 2001, the International Accounting Standards Board (IASB) took over from what prior organization?
International Account Standards
Financial Reporting Board
International Accounting Standards Committee
International Financial Reporting Standards


True or False? There are three basic types of accounting models?
True
False


Current Dividend Yield = ?
(Full Year Dividend) / (Average Market Share Price)
(Average Market Share Price) / (Full Year Dividend)
(Full Year Dividend) / (Current Share Price)
(Current Share Price) / (Full Year Dividend)


How do you calculate goodwill?
total liabilities - total equity
total assets - total liabilities
total assets - total equity
total liabilities - total assets


What do you obtain from this expression: (Earnings After Tax / Net Profit After Tax) - Payable Dividends
Retained Earnings
Diluted Earnings
Equity
Diluted Equity


The financial crisis of 2008 led to more
(None of these)
(All of these)
transparency
bankruptcies


Operational efficiency is measured by which part of the DuPont ratio?
equity multiplier
Asset turnover
Profit margin


Return on Asset = Net income / Sales * ?
Total Assets / Sales
Net income / Total assets
Sales * Total Assets
Sales / Total Assets


Which of the following are not considered financial reports?
3rd party analysis
SEC filings
press releases
auditor's reports


A decrease in non-current assets is _________ net income.
subtracted from
added to
multiplied by
divided by


The DuPont Analysis measures breaks down the Return of Equity into how many parts?
2
10
3
5
4


The qualitative characteristics of financial statements include Materiality and
Faith representation
Comparability
Timeliness


True or False? Net operating gains are added to net income when calculating a cash flows operating activity?
True
False


True or False? The SEC and FASB have similar duties.
True
False


True or False? Working capital is the money it takes to pay off its current liabilities.
False
True


True or False? Financial reporting is not needed by small companies listed on the OTC bulletin board.
False
True