Question 1

A defined benefit plan shifts the risk to the employee as to whether the pension funds will grow to provide for a reasonable pension payment upon retirement.

Accepted Answer

A) True 
 B)False  False

Question 2

The balance sheet pension liability considers the projected benefit obligation.

Accepted Answer

A) True 
 B)False  False

Question 3

Equity earnings are excluded from earnings for the times interest earned coverage.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following statements best compares long-term borrowing capacity ratios?

Accepted Answer

A)  The debt/equity ratio is more conservative than the debt ratio. 
B)  The debt ratio is more conservative than the debt/equity ratio. 
C)  The debt/equity ratio is more conservative than the debt to tangible net worth ratio. 
D)  The debt to tangible net worth ratio is more conservative than the debt/equity ratio. 
E)  The debt ratio is more conservative than the debt to tangible net worth ratio. 
A)  The debt/equity ratio is more conservative than the debt ratio. 
B)  The debt ratio is more conservative than the debt/equity ratio. 
C)  The debt/equity ratio is more conservative than the debt to tangible net worth ratio. 
D)  The debt to tangible net worth ratio is more conservative than the debt/equity ratio. 
E)  The debt ratio is more conservative than the debt to tangible net worth ratio.

Question 5

There are a number of assumptions about future events that must be made regarding a defined benefit plan.An assumption that does not need to be made is:

Accepted Answer

A)  interest rates 
B)  employee turnover 
C)  mortality rates 
D)  compensation 
E)  how long the firm will continue 
A)  interest rates 
B)  employee turnover 
C)  mortality rates 
D)  compensation 
E)  how long the firm will continue

Question 6

Some companies achieve benefits by hundreds of millions of dollars by a pension termination.

Accepted Answer

A) True 
 B)False

Question 7

When a portion of operating lease payments is included in fixed charges, it is an effort to recognize the true total interest that the firm is paying.

Accepted Answer

A) True 
 B)False

Question 8

In the short run, a firm can often meet its interest obligations even when the times interest earned is less than 1.00.

Accepted Answer

A) True 
 B)False

Question 9

Under the Employee Retirement Income Security Act, a company can be liable for its pension plan up to:

Accepted Answer

A)  30 percent of its total assets 
B)  30 percent of its net worth 
C)  40 percent of its total assets 
D)  40 percent of its net worth 
E)  50 percent of its total assets 
A)  30 percent of its total assets 
B)  30 percent of its net worth 
C)  40 percent of its total assets 
D)  40 percent of its net worth 
E)  50 percent of its total assets

Question 10

In general, the profitability of a firm is not considered to be important in determining the short-term, debt-paying ability of the firm.

Accepted Answer

A) True 
 B)False

Question 11

In computing debt to tangible net worth, which of the following is not subtracted in the denominator?

Accepted Answer

A)  Copyrights 
B)  Goodwill 
C)  Patents 
D)  Investments 
E)  Trademarks 
A)  Copyrights 
B)  Goodwill 
C)  Patents 
D)  Investments 
E)  Trademarks

Question 12

Capitalization of interest results in interest being added to a fixed asset instead of expensed.

Accepted Answer

A) True 
 B)False

Question 13

What significant improvement in the financial reporting of pensions have pension accounting rules provided?

Accepted Answer

A)  determination of the expense for the income statement 
B)  limited balance sheet recognition of pension liabilities 
C)  improved disclosure 
D)  determination of the expense for the income statement and limited balance sheet recognition of pension liabilities 
E)  determination of the expense for the income statement, limited balance sheet recognition of pension liabilities, and improved disclosure 
A)  determination of the expense for the income statement 
B)  limited balance sheet recognition of pension liabilities 
C)  improved disclosure 
D)  determination of the expense for the income statement and limited balance sheet recognition of pension liabilities 
E)  determination of the expense for the income statement, limited balance sheet recognition of pension liabilities, and improved disclosure

Question 14

The debt to tangible net worth ratio is a more conservative ratio than the debt ratio.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following will not cause times interest earned to drop? Assume no other changes than those listed.

Accepted Answer

A)  An increase in bonds payable with no change in operating income. 
B)  An increase in interest rates. 
C)  A rise in preferred stock dividends. 
D)  A rise in cost of goods sold with no change in interest expense. 
E)  A drop in sales with no change in interest expense. 
A)  An increase in bonds payable with no change in operating income. 
B)  An increase in interest rates. 
C)  A rise in preferred stock dividends. 
D)  A rise in cost of goods sold with no change in interest expense. 
E)  A drop in sales with no change in interest expense.

Question 16

Which of the following statements is not true relating to a defined contribution pension plan?

Accepted Answer

A)  A defined contribution plan defines the contributions of the company to the pension plan. 
B)  Once the defined contribution is paid, the company has no further obligation to the pension plan. 
C)  This type of plan shifts the risk to the employee as to whether the pension plan will grow to provide for a reasonable pension payment upon retirement. 
D)  There is no problem estimating the company's pension expense. 
E)  This type of plan presents substantial 
A)  A defined contribution plan defines the contributions of the company to the pension plan. 
B)  Once the defined contribution is paid, the company has no further obligation to the pension plan. 
C)  This type of plan shifts the risk to the employee as to whether the pension plan will grow to provide for a reasonable pension payment upon retirement. 
D)  There is no problem estimating the company's pension expense. 
E)  This type of plan presents substantial

Question 17

A joint venture can add significant potential liabilities to the parent company that are not on the face of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

A number of assumptions about future events must be made regarding a defined benefit plan.Which of the following does not represent one of the assumptions?

Accepted Answer

A)  interest rates 
B)  termination date for the firm 
C)  employee turnover 
D)  mortality rates 
E)  compensation 
A)  interest rates 
B)  termination date for the firm 
C)  employee turnover 
D)  mortality rates 
E)  compensation

Question 19

The following financial statement data are taken from Xeron Company's 2010 annual report:   Compute the debt to tangible net worth ratio.

Accepted Answer

A)  146.8% 
B)  135.6% 
C)  53.0% 
D)  45.7% 
E)  none of the answers are correct 
A)  146.8% 
B)  135.6% 
C)  53.0% 
D)  45.7% 
E)  none of the answers are correct

Question 20

As with the debt ratio and the debt/equity ratio, from a long-term, debt-paying ability view, the lower the debt to tangible net worth ratio, the better.

Accepted Answer

A) True 
 B)False

A defined benefit plan shifts the risk to the employee as to whether the pension funds will grow to provide for a reasonable pension payment upon retirement.

The balance sheet pension liability considers the projected benefit obligation.

Equity earnings are excluded from earnings for the times interest earned coverage.

Which of the following statements best compares long-term borrowing capacity ratios?

There are a number of assumptions about future events that must be made regarding a defined benefit plan.An assumption that does not need to be made is:

Some companies achieve benefits by hundreds of millions of dollars by a pension termination.

When a portion of operating lease payments is included in fixed charges, it is an effort to recognize the true total interest that the firm is paying.

In the short run, a firm can often meet its interest obligations even when the times interest earned is less than 1.00.

Under the Employee Retirement Income Security Act, a company can be liable for its pension plan up to:

In general, the profitability of a firm is not considered to be important in determining the short-term, debt-paying ability of the firm.

In computing debt to tangible net worth, which of the following is not subtracted in the denominator?

Capitalization of interest results in interest being added to a fixed asset instead of expensed.

What significant improvement in the financial reporting of pensions have pension accounting rules provided?

The debt to tangible net worth ratio is a more conservative ratio than the debt ratio.

Which of the following will not cause times interest earned to drop? Assume no other changes than those listed.

Which of the following statements is not true relating to a defined contribution pension plan?

A joint venture can add significant potential liabilities to the parent company that are not on the face of the balance sheet.

A number of assumptions about future events must be made regarding a defined benefit plan.Which of the following does not represent one of the assumptions?

The following financial statement data are taken from Xeron Company's 2010 annual report: Compute the debt to tangible net worth ratio.

As with the debt ratio and the debt/equity ratio, from a long-term, debt-paying ability view, the lower the debt to tangible net worth ratio, the better.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 7: Long-Term Debt-Paying Ability

A defined benefit plan shifts the risk to the employee as to whether the pension funds will grow to provide for a reasonable pension payment upon retirement.

The balance sheet pension liability considers the projected benefit obligation.

Equity earnings are excluded from earnings for the times interest earned coverage.

Which of the following statements best compares long-term borrowing capacity ratios?

There are a number of assumptions about future events that must be made regarding a defined benefit plan.An assumption that does not need to be made is:

Some companies achieve benefits by hundreds of millions of dollars by a pension termination.

When a portion of operating lease payments is included in fixed charges, it is an effort to recognize the true total interest that the firm is paying.

In the short run, a firm can often meet its interest obligations even when the times interest earned is less than 1.00.

Under the Employee Retirement Income Security Act, a company can be liable for its pension plan up to:

In general, the profitability of a firm is not considered to be important in determining the short-term, debt-paying ability of the firm.

In computing debt to tangible net worth, which of the following is not subtracted in the denominator?

Capitalization of interest results in interest being added to a fixed asset instead of expensed.

What significant improvement in the financial reporting of pensions have pension accounting rules provided?

The debt to tangible net worth ratio is a more conservative ratio than the debt ratio.

Which of the following will not cause times interest earned to drop? Assume no other changes than those listed.

Which of the following statements is not true relating to a defined contribution pension plan?

A joint venture can add significant potential liabilities to the parent company that are not on the face of the balance sheet.

A number of assumptions about future events must be made regarding a defined benefit plan.Which of the following does not represent one of the assumptions?

The following financial statement data are taken from Xeron Company's 2010 annual report: Compute the debt to tangible net worth ratio.

As with the debt ratio and the debt/equity ratio, from a long-term, debt-paying ability view, the lower the debt to tangible net worth ratio, the better.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters