Question 1

The straight-line depreciation method is a conservative depreciation method.

Accepted Answer

A) True 
 B)False

Question 2

Tom Copeland, Tim Keller, and Jack Morrin, on their book Valuation, Measuring and Managing the Value of Companies, observed that acquirers paid too much for companies because of all but one of the following reasons:

Accepted Answer

A)  market potential greater than estimated 
B)  overoptimistic appraisal of market potential 
C)  overestimation of synergies 
D)  poor due diligence 
E)  overbidding 
A)  market potential greater than estimated 
B)  overoptimistic appraisal of market potential 
C)  overestimation of synergies 
D)  poor due diligence 
E)  overbidding

Question 3

Analytical review procedures may be performed at various times within the audit.

Accepted Answer

A) True 
 B)False

Question 4

With the Altman model, the higher the Z score, the more likely the firm will go bankrupt.

Accepted Answer

A) True 
 B)False

Question 5

A review of the computational methodology used to compute the ratios for annual reports indicated that there were wide differences of opinion on how many of the ratios should have been computed.

Accepted Answer

A) True 
 B)False

Question 6

Most of the ratios given a high significance rating by commercial loan officers have a primary measure of liquidity or debt.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is not true?

Accepted Answer

A)  A review of financial statements, including the notes, will indicate how conservative the statements are in regard to accounting policies. 
B)  Accounting policies that result in the slowest reporting of income are the most conservative. 
C)  When a firm has conservative accounting policies, it is said that its earnings are of high quality. 
D)  Under inflationary conditions, the least conservative inventory method is fifo. 
E)  Conservative accounting policies always result in the lowest reported income for any given period of time. 
A)  A review of financial statements, including the notes, will indicate how conservative the statements are in regard to accounting policies. 
B)  Accounting policies that result in the slowest reporting of income are the most conservative. 
C)  When a firm has conservative accounting policies, it is said that its earnings are of high quality. 
D)  Under inflationary conditions, the least conservative inventory method is fifo. 
E)  Conservative accounting policies always result in the lowest reported income for any given period of time.

Question 8

The interest rate that is assumed to be earned on pension funds can have a material influence on the pension expense and the pension liability.The higher the rate of interest assumed to be earned on pension funds, the higher the pension expense and the higher the pension liability.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following depreciation methods is considered to be the least conservative?

Accepted Answer

A)  Sum-of-the-Years' Digits 
B)  Declining-Balance Method 
C)  Straight-Line 
D)  each method is equally conservative 
E)  Sum-of-the-Years' Digits and Declining-Balance Method are equally conservative 
A)  Sum-of-the-Years' Digits 
B)  Declining-Balance Method 
C)  Straight-Line 
D)  each method is equally conservative 
E)  Sum-of-the-Years' Digits and Declining-Balance Method are equally conservative

Question 10

Beaver did a study that indicated that failed firms have less cash but more inventory one year before failure than do similar firms that do not fail.

Accepted Answer

A) True 
 B)False

The straight-line depreciation method is a conservative depreciation method.

Tom Copeland, Tim Keller, and Jack Morrin, on their book Valuation, Measuring and Managing the Value of Companies, observed that acquirers paid too much for companies because of all but one of the following reasons:

Analytical review procedures may be performed at various times within the audit.

With the Altman model, the higher the Z score, the more likely the firm will go bankrupt.

A review of the computational methodology used to compute the ratios for annual reports indicated that there were wide differences of opinion on how many of the ratios should have been computed.

Most of the ratios given a high significance rating by commercial loan officers have a primary measure of liquidity or debt.

Which of the following statements is not true?

The interest rate that is assumed to be earned on pension funds can have a material influence on the pension expense and the pension liability.The higher the rate of interest assumed to be earned on pension funds, the higher the pension expense and the higher the pension liability.

Which of the following depreciation methods is considered to be the least conservative?

Beaver did a study that indicated that failed firms have less cash but more inventory one year before failure than do similar firms that do not fail.

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

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

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 11: Expanded Analysis

The straight-line depreciation method is a conservative depreciation method.

Tom Copeland, Tim Keller, and Jack Morrin, on their book Valuation, Measuring and Managing the Value of Companies, observed that acquirers paid too much for companies because of all but one of the following reasons:

Analytical review procedures may be performed at various times within the audit.

With the Altman model, the higher the Z score, the more likely the firm will go bankrupt.

A review of the computational methodology used to compute the ratios for annual reports indicated that there were wide differences of opinion on how many of the ratios should have been computed.

Most of the ratios given a high significance rating by commercial loan officers have a primary measure of liquidity or debt.

Which of the following statements is not true?

The interest rate that is assumed to be earned on pension funds can have a material influence on the pension expense and the pension liability.The higher the rate of interest assumed to be earned on pension funds, the higher the pension expense and the higher the pension liability.

Which of the following depreciation methods is considered to be the least conservative?

Beaver did a study that indicated that failed firms have less cash but more inventory one year before failure than do similar firms that do not fail.

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

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

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