Unit 7
As a result of corporate transactions, a company's assets remain the same and its owners' equity decreases. Which of the following statements is true? Prepaid expenses decrease. Total liabilities increase. Accrued expenses decrease. Net worth increases.
B
The ______ rules provide that a company may provide shareholders with a copy of the Form 10-K instead of sending an annual report.
SEC
When a corporation's accounting year ends on a date other than December 31, the company is using: A fiscal year A gregorian year A non-calendar year A lunar year
A
Form 8-k
A change in management, change in the company's name, mergers or acquisitions, bankruptcy filings, and major new product introductions or sale of a product line. A Form 8-K even has to be filed when a member of the board of directors resigns over a disagreement. The 8-K is filed within four business days of the occurrence.
A company has filed for an initial public offering for its $10 par common stock. The IPO is priced at $35 per share. Where on the balance sheet is the extra $25 per share recorded? Capital surplus Distributed dividends Paid-in Earnings Retained earnings
A. Capital surplus is the amount of premium paid by shareholders above par value. It may also be called paid-in capital or paid-in surplus, but it is not paid-in earnings.
A member of the LMP Corporation's board of directors has just resigned after a dispute with the board chair. This would be reported to the public on: Form 8-K Form 10-K Form 10-Q Form D
A
Dividends received on investments held by a corporation are part of cash flow from which activities? Operating Investing Sales Financing
A
One of the components of a cash flow statement is cash flow from investing activities. Included would be: Cash receipts (money coming in) from items such as interest and dividends Transactions and events involving the purchase & sale of land, buildings, & equipment Cash proceeds from issuing stocks & bonds Payments to retire bonds and the payment of dividends
B
A publicly traded corporation keeps its books on a calendar-year basis. An investor wanting the most up-to-date financial information in late August would view the company's June 30 Form 8-K June 30 Form 10-Q July 31 Form 10-Q December 31 Form 10-K
B. Form 10-Q is prepared every quarter. Because this company operates on a calendar-year basis, those quarters end in March, June, September, and December.
Which of the following would have the effect of increasing a company's cash flow? Extending credit to good customers Reducing sales Issuance of a bond Increasing inventory
C
Looking at the balance sheet, a corporation builds its capital structure with all of the following except: Retained earnings Long-term debt Cash Capital stock
C. A corporation's capital structure consists of its long-term debt plus shareholders' equity. Included in shareholders' equity are the equity capital (stock) and the retained earnings.
An analyst comparing revenues with expenses is most likely analyzing: Working capital Liquidity Capitalization Cash flow
D
The SEC requires that reporting companies (those registered with the SEC) file certain information within specified time limits. Which of the following reports carries the shortest time limit? Form 10-Q Annual Report Form 10-K Form 8-K
D. 4 days
Form 10-Q
Filed quarterly (Q for quarterly). It contains unaudited financial statements, and , it must be filed after each of the first three fiscal quarters of the year (no 10-Q is filed at the end of the fourth quarter
Footnotes
to the financial statements identify significant financial and management issues that may affect the company's overall performance, such as accounting methods used, extraordinary items, accounting for inventory (FIFO or LIFO), pending litigation, and management philosophy.
Which of the following corporate actions will lead to an increase in a company's owners' equity? Issuing $10 million of 6% $100 par preferred stock Issuing $10 million of 4% debentures Payment of a cash dividend to common shareholders Redemption of outstanding debt securities at a price in excess of par value
A. Stock represents equity in a corporation; issuing additional stock is a straightforward method of increasing net worth (owners' equity).
A security must be registered with the Securities and Exchange Commission (SEC) before being offered to the public. (T/F)?
T
Stock Split does not affect shareholders' equity. (T/F)?
T
Which of the following best describe the balance sheet formula? 1. Assets minus liabilities equals net worth. 2. Sales minus expenses equals operating income. 3. Liabilities plus equity equals assets. 4. Dividends plus retained earnings equals net income.
1 & III
An analyst is viewing financial statements of Diderot Clothing Stores (DCS), a chain of high-fashion women's apparel. DCS had $7 million as its beginning-of-year retained earnings and it made post-tax profits of $3 million. The board of directors decides to pay a dividend of $1 million. Once paid, what will be the ending retained earnings? $9 million $3 million $7 million $10 million
A. The ending retained earnings = beginning retained earnings + net income - dividend. That means $7 million + $3 million - $1 million = $9 million.
Potential litigation for patent infringement would appear on a corporation's balance sheet as a deferred asset. footnotes. income statement as an expense. statement of potential litigation.
B
A corporation calls in $5 million of its outstanding 6% bonds. The call price is 103. The effect on the balance sheet is all of the following except: Owners' equity > Current assets > Current liabilities > Long-term liabilities >
C
One of the best sources of financial information is found in the reports required to be filed with the SEC by publicly traded companies. The easiest way to access this information is by: Writing a letter to the company Making an appointment to meet with the company's CFO Using EDGAR Visiting the SEC's office
C
A fundamental analyst would be interested in funds available for use in the business. Doing which of the following would have the greatest impact on future cash flow? Depreciation on assets used in the business Retaining Earnings Amortizing goodwill Retiring outstanding bonds
D
Federal securities laws require publicly traded companies to disclose certain information on a regular basis. Which of these forms must be submitted quarterly? Form PF Form 8-K Form 10-K Form 10-Q
D
The owners' equity portion of a corporation's balance sheet would contain all of the following except: Treasury stock Preferred stock Paid-in Capital Net Income
D
Under SEC regulations, publicly traded (reporting) companies are required to file all of the following except: Form 10-K Form 10-Q Form 8-K Form 13F
D
Form 10-K
Most domestic public issuers must file an annual report to the SEC on Form 10-K. This report is a comprehensive overview of the company's business and financial condition and includes financial statements that have been audited by an independent accountant. Do NOT confuse this with the annual report to shareholders, which also contains an audited statement and is sent to shareholders.
All of the following are measurements of cash flow except: Cash flow from operating activities Cash flow from financing activities Cash flow from investing activities Cash flow from sales activities
D. The cash flow statement reports a business's sources and uses of cash and the beginning and ending values for cash and cash equivalents each year. There are three components generating cash flow: operating activities; investing activities; and financing activities.
Financial leverage
is a company's ability to use long-term debt to increase its return on equity. A company with a high ratio of long-term debt to equity is said to be highly leveraged
Which of the following would appear as assets on a corporation's balance sheet? 1. Prepaid expenses 2. Deferred tax credits 3. Notes payable 4. Notes receivable
1 & 4
KPT, Inc., is preparing to report its net income for the past year. An increase in which of the following causes a decrease in the reported net income? 1. Tax rate 2. Cash dividend 3. Interest charged on bank loans
1 & 3. Higher taxes mean less net income. Interest charged on loans is an expense item; increasing it lowers operating income. Dividends are paid out of retained earnings and have no effect on the net income the company reports.
Publicly traded corporations are generally required to have an annual independent audit of their financial records. What is the highest opinion offered under GAAP? Unqualified opinion Disclaimer of opinion Adverse opinion Qualified opinion
A
