Ch 1, 2, 5, 6 MCQs

Midterm Exam

A type of analytics that focuses on mastering the past within the FSA framework.

Diagnostic Analytics

For an equity investor, the most important question is:

How do the company's projected future cash flows and earnings map into company value?

For a potential lender, the most important question is:

Will the company go bankrupt?

Data identification and data incorporation are important parts of the Master the Data component of the general FSA framework.

Master the Data

The process of evaluating raw, unstructured, and unrefined data to address all types of questions.

Data Wrangling

Financial statement users that require a forecast of the company's product demand to ensure sufficient product availability to support sales.

Suppliers

Porter's five forces are primarily used to evaluate the competitive environment.

Competitive Environment

One of Porter's five forces.

Bargaining Power of Buyers

One of Porter's five forces, addresses the ease of switching from one competitor to another.

Threat of Substitute Products or Services

A company that competes on the basis of cost is more likely to have a comparative advantage as compared to its competitors.

Comparative Advantage

Any setting in which one party in a transaction has more information than the other party.

Information Asymmetry

Captures unpredictable difference between the reported value and the 'true' value.

Noise

Generally be considered unstructured data.

Product Review

An announcement of a new CEO would most likely be reported on the 8-K SEC form.

8-K

The biggest difference between a 10-K and a 10-Q is the frequency of disclosure.

Frequency of disclosure

An aggregation of all earnings recognized by the company since inception less amounts paid to shareholders via dividends or share buybacks.

Retained Earnings

Liabilities that has the most reporting discretion.

Warranty Provisions

The phrase, “Trust, but verify' would be an example

Professional Skepticism

Descriptive and diagnostic analytics would be most closely associated with the Master the Past component of the AMPS model

Master the Past

For Apple, what is the functional equivalent of capital expenditures

Payments for acquisition of property, plant, and equipment

An estimate associated with increased warranty expenses will impact which working capital account and in what way?

Increased warranty liability

An estimate associated with increased bad debt expense will impact which working capital account?

Net Accounts Receivable

Deciding to extend the useful life of equipment from five to seven years for depreciation purposes to increase income in the current period would be an example of which type of income?

Managed Transitory

According to Dichev et al., which of the following is the most likely incentive for managers to misrepresent economic performance?

To influence stock price

According to Dichev, et al., which of the following is the least likely incentive for managers to misrepresent economic performance?

Because they feel other companies misrepresent performance

Which of the following is the characteristic of the firm that jointly describes the underlying economic process it uses to generate value and the degree to which its income statement transparently conveys this value generation to financial statement users?

Accounting quality

Which of the following is the characteristic of the data that describes how reliably the data describe a real-world construct?

Data quality

What are accrual errors that are correlated with the incentives facing management called?

Intentional

Which financial ratio is most likely to give an overall view of a company's capital structure?

Debt-to-equity ratio

Which two adverbs that describe balance sheet quality in terms of the firm's economic resources (assets) and non-equity claims against the resources (liabilities) are reflected on the balance sheet.

Precisely and completely

What does Altman's Z-score help to assess?

Risk of bankruptcy

What does the interest coverage ratio help assess for a company?

Solvency

Which debt securities held as investments are valued at amortized cost?

Held-to-maturity

Which equity securities held as investments are valued at capitalized value equals the purchase price plus share of earnings minus paid dividends?

Equity method

What is an example of a contingent liability?

Product warranties

If a firm is performing on par with its industry peers, its industry adjusted financial ratios will be:

approximately zero