CHAPTER 1 FINA 4300

alloted questions from chapter

What is the main purpose of financial reporting?

to disclose info about a company’s performance, financial position and changes in financial position.

Financial Statement Analysis

The main purpose of financial statement analysis is to use financial information to evaluate a company and help make decisions.

Which financial statement shows a company’s position at a point in time? 

Statement of financial position (balance sheet)

Which statement measures profitability during the year?

Statement of Comprehensive Income (Income Statement)

Which statement shows how equity increased or decreased throughout the year?

Statement of Changes in Equity

Which statement explains where cash came from and where it went?

Statement of Cash Flows

 Which term refers to a company's ability to generate earnings or net income?

Profitability

Which concept focuses on the actual movement of cash into and out of a company?

Cash flows

Which term refers to a company's ability to meet short-term obligations?

liquidity

What term describes a company's ability to meet long-term obligations?

Solvency

  What are consolidated financial statements? 

 Parent company and subsidiaries combined into one report

What do earnings per share (EPS) numbers represent?

Net income attributable to shareholders divided by shares outstanding

 Which EPS measure includes potentially dilutive securities such as stock options?

Diluted EPS

 What is the difference between Basic EPS and Diluted EPS?

difference basic eps uses the actual number of shares outstanding while diluted includes potentially dilutive shares

What is included in the notes accompanying the financial statements?

Detailed information about line items on the financial statements

Which report provides a narrative explanation of financial statements and gives insights into future prospects?

Management Discussion & Analysis (MD&A)

What is the primary purpose of an auditor's report?

 Provide reasonable assurance that financial statements are free from material misstatement

which type of audit opinion indicates that the financial statements give a true and fair view in accordance with applicable accounting standards?

unqualified opinion

Which audit opinion indicates that the financial statements are fairly presented except for a specific issue?

qualified

Which audit opinion indicates that the financial statements are not fairly presented?

adverse

Which audit opinion is issued when the auditor cannot express an opinion?

opinion

What is the primary purpose of internal controls?

 Support accurate financial statements and reliable reporting

What must auditors express an opinion on under the Sarbanes-Oxley Act in the United States?

The company’s internal control system

Which earnings per share measure is calculated using only the shares that are actually outstanding during the period?

Basic EPS