| 1. |
B |
Management is responsible, and the Board has an oversight responsibility. |
| 2. |
B |
|
| 3. |
D |
If you answered B, you’re out-of-date. The current FASB rules take a balance sheet approach to deferred taxes, not an income statement approach. |
| 4. |
E |
All of the practices are targeted by the SEC’s earning management initiative. |
| 5. |
D |
|
| 6. |
B |
Current assets are generally assets that will be converted into cash within a year (or one normal business cycle). Fixed assets (equipment, plant) are usually long-term in nature. |
| 7. |
D |
The ratio of current assets to current liabilities is important for the ongoing liquidity of the company. Generally, a ratio of 1:1 is considered healthy. |
| 8. |
A |
Understanding these three sections and thinking about the future of the business in terms o the cash flow from operations, investment and financing are a great way to access a business. |
| 9. |
C |
Basic and diluted EPS. The dilutive cost to shareholders of issuing stock options is reflected in the EPS amounts. |
| 10. |
D |
There is no common definition of cash flow per share. Some think there should be such a definition. |
| 11. |
F |
|
| 12. |
C |
If there is one area to focus on and urge conservative accounting for, it is revenue recognition. Again and again, for many years, this has been the number one problem area. |
| 13. |
C |
This is the biggest current hot button for the SEC. Investors want to know how the management team looks at the business and how those pieces are performing. |
| 14. |
D |
|
| 15. |
B |
Gross margins are hugely important to financial statement readers. Odd trends and shifts in percentage gross margins usually have major implications. |
| 16. |
C |
MD&A is too often a boilerplate regurgitation of the numbers. This is not the intent. It should be analytical and forward-looking. SEC reviews almost always hammer away on this point. |
| 17. |
C |
Small companies miss this a lot and end up restating. |
| 18. |
C |
There might be an argument for B, but it would be tough to prove and represents aggressive accounting. |
| 19. |
E |
Most big companies do this, and it is good discipline for the operating management to acknowledge its responsibility to the shareholders. |
| 20. |
B |
This is why you are taking this quiz. |
| 21. |
C |
Too many audit committees let the auditor or CFO run the agenda. Don’t fall into that trap. Be active and a leader. |
| 22. |
C |
|
| 23. |
D |
The SEC has put a big emphasis on auditor independence and complications resulting from the growth of the public accounting firms’ consulting practices. |
