F.S.A. Final MCQs
.
- 1.
With respect to Statement 1, which of the following is the most likely effect of management’s decision to expense rather than capitalize these expenditures?
- A.
2009 net profit margin is higher than if the expenditures had been capitalized.
- B.
2009 total asset turnover is lower than if the expenditures had been capitalized.
- C.
Future profit growth will be higher than if the expenditures had been capitalized.
Correct Answer
C. Future profit growth will be higher than if the expenditures had been capitalized. -
- 2.
With respect to Statement 2, what would be the most likely effect in 2010 if AMRC were to switch to an accelerated depreciation method for both financial and tax reporting?
- A.
Net profit margin would decrease.
- B.
Total asset turnover would increase.
- C.
Cash flow from operating activities would increase.
Correct Answer
C. Cash flow from operating activities would increase. -
- 3.
With respect to Statement 3, what is the most likely effect of the impairment loss?
- A.
Net income in years prior to 2009 was likely understated.
- B.
Net profit margins in years after 2009 will likely exceed the 2009 net profit margin.
- C.
Cash flow from operating activities in 2009 was likely lower due to the impairment loss.
Correct Answer
B. Net profit margins in years after 2009 will likely exceed the 2009 net profit margin. -
- 4.
Based on Exhibits A and B, the best estimate of the average remaining useful life of the company’s plant and equipment at the end of 2009 is:
- A.
20.75 years.
- B.
24.25 years.
- C.
30.00years.
Correct Answer
A. 20.75 years. -
- 5.
With respect to Statement 4, if AMRC had used its old classification method for its leases instead of its new classification method, its 2009 total asset turnover ratio would most likely be:
- A.
Lower.
- B.
Higher.
- C.
The same.
Correct Answer
A. Lower. -
- 6.
With respect to Statement 4 and Exhibit A, if AMRC had used its old classification method for its leases instead of its new classification method, the most likely effect on its 2009 ratios would be a:
- A.
Higher net profit margin.
- B.
Higher fixed asset turnover.
- C.
Higher total liabilities-to-total assets ratio.
Correct Answer
C. Higher total liabilities-to-total assets ratio. -
- 7.
Jordan’s response about the financial statement impact of Alpha’s decision to capitalize the cost of its new computer system is most likely correct with respect to:
- A.
Lower net income.
- B.
Lower total assets.
- C.
Higher cash flow from operating activities.
Correct Answer
C. Higher cash flow from operating activities. -
- 8.
Jordan’s response about the ratio impact of Alpha’s decision to capitalize interest costs is most likely correct with respect to the:
- A.
Interest coverage ratio.
- B.
Fixed asset turnover ratio.
- C.
Interest coverage and fixed asset turnover ratios.
Correct Answer
B. Fixed asset turnover ratio. -
- 9.
Jordan’s response about the impact of Alpha’s decision to classify its lease as an operating lease instead of finance lease is most likely incorrect with respect to:
- A.
Netincome.
- B.
Solvency and activity ratios.
- C.
Cash flow from operating activities.
Correct Answer
C. Cash flow from operating activities. -
- 10.
Jordan’s response about the impact of the different depreciation methods on net profit margin is most likely incorrect with respect to:
- A.
Accelerated depreciation.
- B.
Straight-line depreciation.
- C.
Units-of-production depreciation.
Correct Answer
A. Accelerated depreciation. -
- 11.
Jordan’s response about his approach to estimating a company’s need to reinvest in its productive capacity is most likely correct regarding:
- A.
Estimating the average age of the asset base.
- B.
Estimating the total useful life of the asset base.
- C.
Estimating the average remaining useful life of the asset base.
Correct Answer
B. Estimating the total useful life of the asset base. -
- 12.
Jordan’s response about the effect of Beta’s impairment loss is most likely incorrect with respect to the impact on its:
- A.
Debt to total assets.
- B.
Fixed asset turnover.
- C.
Cash flow from operating activities.
Correct Answer
C. Cash flow from operating activities. -
- 13.
Jordan’s response about the effect of Alpha’s revaluation is most likely correct with respect to the impact on its:
- A.
Return on equity.
- B.
Return on assets.
- C.
Debt to capital ratio.
Correct Answer
A. Return on equity. -
- 14.
Based on Martinez’s conclusions, Stellar’s financial statements are best categorized as:
- A.
Non-GAAPcompliant.
- B.
GAAP compliant, but with earnings management.
- C.
GAAP compliant and decision useful, with sustainable and adequate returns.
Correct Answer
B. GAAP compliant, but with earnings management. -
- 15.
Based on Conclusion 2, after the acquisition of Solar, Stellar’s earnings are most likely:
- A.
Understated.
- B.
Fairlystated.
- C.
Overstated.
Correct Answer
C. Overstated. -
- 16.
In his follow-up analysis relating to Conclusion 3, Martinez should focus on Stellar’s:
- A.
Total accruals.
- B.
Discretionary accruals.
- C.
Non-discretionary accruals.
Correct Answer
B. Discretionary accruals. -
- 17.
What will be the impact on Stellar in the current year if Martinez’s belief in Conclusion 4 is correct? Compared with the previous year, Stellar’s:
- A.
Current ratio will increase.
- B.
Days sales outstanding (DSO) will decrease.
- C.
Accounts receivable turnover will decrease.
Correct Answer
B. Days sales outstanding (DSO) will decrease. -
- 18.
If the accounting rules were to change, Silk Road’s assets would increase by approximately:
- A.
1,297.
- B.
1,576.
- C.
1,704.
Correct Answer
A. 1,297. -
- 19.
If the accounting rules were to change, SilkRoad’s interest coverage ratio would be closest to:
- A.
3.03.
- B.
3.50.
- C.
5.04.
Correct Answer
B. 3.50. -
- 20.
If the accounting rules were to change, Silk Road’s financial leverage ratio would be closest to:
- A.
1.37.
- B.
1.79.
- C.
2.92.
Correct Answer
C. 2.92. -
- 21.
Will the change in accounting rules impact the result of the initial screening process for Colorful Concepts?
- A.
It passes the screens now, but will not pass if the accounting rules change.
- B.
It passes the screens now and will continue to pass if the accounting rules change.
- C.
It fails the screens now and will continue to fail if the accounting rules change.
Correct Answer
A. It passes the screens now, but will not pass if the accounting rules change. -
- 22.
Based on Leenid’s analysis of the results of the initial screening, relative to Colorful Concepts the bond rating of Silk Road should be:
- A.
Lower.
- B.
Higher.
- C.
The same.
Correct Answer
A. Lower. -
- 23.
Ignoring the potential impact of any accounting change and excluding the investment in associates, the net pro t margin for Colorful Concepts would be closest to:
- A.
6.0%.
- B.
7.2%.
- C.
7.5%.
Correct Answer
B. 7.2%. -
- 24.
Ignoring the impact of any accounting change, the asset turnover ratio for Colorful Concepts excluding the investments in associates would:
- A.
Stay the same.
- B.
Increase by 0.10.
- C.
Decrease by 0.10.
Correct Answer
B. Increase by 0.10. -
- 25.
Excluding the investments in associates would result in the interest coverage ratio for Colorful Concepts being:
- A.
Lower.
- B.
Higher.
- C.
The same.
Correct Answer
C. The same. -
- 26.
Over the three-year period presented in Exhibit 1, Bickchip’s return on equity is best described as:
- A.
Stable.
- B.
Trending lower.
- C.
Trending higher.
Correct Answer
C. Trending higher. -
- 27.
Based on the DuPont analysis, Abay’s belief regarding ROE is most likely based on:
- A.
Leverage.
- B.
Profit margins.
- C.
Asset turnover.
Correct Answer
A. Leverage. -
- 28.
Based on Abay’s criteria, the business segment best suited for divestiture is:
- A.
Medical equipment.
- B.
Power and industrial.
- C.
Automation equipment.
Correct Answer
B. Power and industrial. -
- 29.
Bickchip’s cash-flow-based accruals ratio in 2009 is closest to:
- A.
9.9%.
- B.
13.4%.
- C.
23.3%.
Correct Answer
A. 9.9%. -
- 30.
The cash-flow-based accruals ratios from 2007 to 2009 indicate:
- A.
Improving earnings quality.
- B.
Deteriorating earnings quality.
- C.
No change in earnings quality.
Correct Answer
A. Improving earnings quality. -
- 31.
The ratio of operating cash ow before interest and taxes to operating income for Bickchip for 2009 is closest to:
- A.
1.6.
- B.
1.9.
- C.
2.1.
Correct Answer
B. 1.9. -
- 32.
Based on the ratios for operating cash ow before interest and taxes to operating income, Abay should conclude that:
- A.
Bickchip’s earnings are backed by cash flow.
- B.
Bickchip’s earnings are not backed by cash flow.
- C.
Abay can draw no conclusion due to the changes in the ratios over time.
Correct Answer
A. Bickchip’s earnings are backed by cash flow. -
- 33.
Compared to holding securitized nance receivables on the balance sheet, treating them as sold had the effect of reducing Software Services’ reported financial leverage by:
- A.
6.8%.
- B.
7.4%.
- C.
9.2%.
Correct Answer
A. 6.8%. -
- 34.
Had the securitized nance receivables been held on the balance sheet, Software Services’ ratio of liabilities to total capital would have been closest to:
- A.
73.0%.
- B.
74.8%.
- C.
80.4%.
Correct Answer
B. 74.8%. -
- 35.
How much of PDQ’s value can be explained by its equity stake in Astana?
- A.
6.5%.
- B.
10.6%.
- C.
20.0%.
Correct Answer
A. 6.5%. -
- 36.
On a “solo” basis, PDQ’s P/E ratio is closest to:
- A.
19.6.
- B.
21.0.
- C.
24.5.
Correct Answer
A. 19.6. -
- 37.
The adjusted financial statements were created during which phase of the financial analysis process?
- A.
Data collection.
- B.
Data processing.
- C.
Data interpretation.
Correct Answer
B. Data processing. -
- 38.
The estimate of PDQ’s solo value is crude because of:
- A.
The potential differences in accounting standards used by PDQ and Astana.
- B.
The differing risk characteristics of PDQ and Astana.
- C.
Differences in liquidity and market effciency where PDQ and Astana trade.
Correct Answer
A. The potential differences in accounting standards used by PDQ and Astana. -
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Oct 05, 2017Quiz Edited by
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