Mock 7

Over a period of 16 months, an investor has earned a return of 12%. The investor's annualized return is closest to

(1+r) ^n -1 (1+0.12)^(12/16)-1 1.12^.75-1 =8.87%

A company spends €10 million on start-up costs that are expensed for accounting purposes and fully amortized over five years using the straight-line method for tax purposes. If the start-up costs will result in future economic benefits, the tax base at the end of Year 1 is?

10/5 = 2 10-2 = 8 tax base end year 1 is 8

Contract Liability

A company's obligation to transfer goods or services to a customer for which the company has received or will receive consideration from the customer.

An analyst gathers the following information (in € thousands) about a company: Year 2 Year 1 Revenue 2,400 2,000 Cost of sales 1,800 1,400 Ending accounts receivable 240 160 The number of days of sales outstanding for Year 2, based on a 365-day year, is closest to:

Avg AR = 240+160/2 = 200 2400/200 = 12 365/12 = 30 days of sales outstanding

T or F: A member who manages pooled assets to a specific mandate is required to determine suitability for investors in the fund

False, a member who manages pooled assets to a specific mandate is required to invest in a manner consistent with the stated mandate of the fund

T or F: When using a common-sized income statement, each line item, including cost of sales, is stated as a percentage of net income

False, it's revenues

An analyst gathers the following information about a company's fiscal year ending 31 December: Number of shares outstanding on 1 January: 1,200,000 Number of shares issued on 1 September: 300,000 Net income: $3,500,000 If a 2-for-1 stock split took effect on 1 August, basic EPS is closest to:

Jan - Aug : 8 months (1,200,000x 2 stock split) x 8/12 = 1,600,000 300,000 issued shares = 2,400,000+300,000=2,700,000 2,700,000 x 4/12 = 900,000 1,600,000 + 900,000 = 2,500,000 = 3,500,000/2,500,000 = $1.4

Net Profit Margin

Net Income/Sales Revenue

Notes to the financial statements

Notes clarify information presented in the financial statements and provide additional detail; breakdown of inventory, information about the accounting policies, methods, and estimates used to prepare the financial statements

Total Asset Turnover

Sales/Total Assets

impairment loss under gaap

The carrying amount is compared with the undiscounted expected future cash flows. If the carrying amount exceeds the undiscounted expected future cash flows, the carrying amount is considered not recoverable. Would then be written down to fair value and an impairment loss would be reported in the income statement

which policy combination most likely leads to an increase in aggregate demand from the private sector relative to the public sector?

Tight fiscal policy & easy monetary policy

a smaller significance level would result in a lower probability of what type of error?

Type 1 error

is increasing spending expansionary?

Yes

In a fixed parity currency regime, excess private demand for the domestic currency implies

a growing stock of foreign exchange reserves

Amortization of Bond Discount is _____ to Net Income and Amortization of Bond Premium is _____ from Net Income

added, subtracted; a bond premium counts as a liability, thus amortization of a liability is a non-cash increase in Net Income, so you have to subtract it from net income; buying bond at a discount = getting the bond for cheaper than face value => asset; buying bond at premium = "overpaying" for face value => liability

contract asset

asset recognizing that a seller has a conditional right to receive payment after satisfying a performance obligation.

when policy rates are above the neutral rate, monetary policy is

contractionary

If a stock priced at $100 experiences a 45% decline in price over a 1-year holding period, the continuously compounded return is closest to?

e^-.45 = .63 .63-1 =-0.36 -> -36%

A company's interest payments are fully tax deductible. When tax rates increase, the company's cost of debt

increases

Is an increase in short term borrowing a cash inflow or outflow

inflow

The F-statistic for the test of fit of a simple linear regression is given by the

mean square regression divided by the mean square error

neutral rate equation

neutral rate = trend growth + inflation

information asymmetry

occurs in situations where some parties have more information regarding an issue than others; complex situations

inventory write down reduces

profit and the carrying amount of inventory on the balance sheet and thus has a negative effect on profitability, liquidity, and solvency ratios

penetration pricing

setting a low initial price on a new product to appeal immediately to the mass market

impairment loss under ifrs

the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount - The recoverable amount is the higher of its fair value less costs of disposal and its value in use

sampling error

the difference between the results of random samples taken at the same time

inventory write down

the expense incurred when the NRV of an item of inventory falls below its cost or original purchase price; a product that costs $100, but due to weak economic conditions, the cost of the product reduced by 50%

Positive forward points/premium indicates

the interest rates in the base currency region are lower than the interest rates in the price currency region

Platykurtic vs. Leptokurtic

thin vs fat tails - lepto = fatso -platy = puny