1. Which of the following mechanisms least likely to discourage management manip
ID: 2703983 • Letter: 1
Question
Which of the following mechanisms least likely to discourage management manipulation of earnings?
A. Debt Convenants b. Securities regulators C. Class action lawsuits
2.
High earnings quility most likey to:
A. result in steady earnings growth
B. improve the ability to predict future earnings
C. be based on conservative accounting choices
3.
The best justification for using accrual -based accounting is that it:
A. reflects the company's underlyying cash flows
B. reflects the economic nature of a nature Company's transactions
C. Limits managements's discretion in reporting financial results
4 . The best justification for using cash -based accounting is that it:
A.is more conservative
B. Limits management's deicretion in reporting financial results
C. Marches the timing of revenue recognition with that of associated expenses
5.
Which of the following is not a measure of aggregate accruals
The change in net operating assets
B. The difference between operating income and net operating assets
C. The difference between net income and operating and investing cash flows
6.
Consider the following balance sheet information for profile, inc.
Year ended 31 December 2007 2006
Cash and short term investment 14,000
13,200
Total current aset
21,000
20,500
Total assets
97,250
88,000
current liabilities
31,000
29,000
total debt
50,000
45,000
Total liabilities 87,000 79,000
profile's balance-sheet -based accruals ratio in 2007 was closest to:
A. 12.5%
B. 13.0%
c. 16.2%
7.
Rodrigue's SA reported the following financial statement data for the year ended 2007
Average net operating assets
39,000
Net income
14,000
Cash flow from operating activity
17,300
cash flow from investing activity -12,400
A. -8%
B. -19.1%
C. 23.3%
8.
Cash collected from customers is least likely to differ from sales due to change in:
Inventory
Deffered revenue
Accounts receivable
9 . reported revenue is most likely to have been reduced by management's discretionary estimate of:
A. warranty provisions
B. inventory damage and theft
C. interest to be earned on credit sales
10.
Zimt AG reports 2007 revenue of L14.3 billion. During 2007, its accounts receivable rose by L0.7 billion, accounts payable
increased by L1.1 billion, and unearned revenue increased by L0.5 billion. Its cash collections from custormers in 2007 were
closest to:
A. L14.1billion
B. L14.58 billion
C. L15.2 billion
11.
Cinamon Corp began the year with $12 million in accounts receivable and $31 million in deferred revenue. It ended the year with $15
million in accounts receivable and $27 million included in total revenue wre closest to:
A. $1 million
B. $7 million
C. $12 million
12.
Which of the following is least liklely to be likely to be a warning sign of low -qualify revenue?
A. large decrease in deferred revenue
B. large increase in accounts receivable
C. A large increase in the allowance for doubtful accounts
13 .. An unexpectedly large reduction in the unearning revenue account is most likely a sign that the company:
A. accelerated revenue recognition
B. Overstated revenue in prior periods
C. Adopted more conservative revenue recognition practices
14 . Canelle SA reported 2007 revenue of L137 million. In accounts receivable balance began the year at L11 million and
ended the year at L16 million. At year end, L2 million of receivables had been securitized. Canelle's cash collections
from customers(in L millions) in 2007 were closest to:
A. L130
B. L132
C. L134
15 In order to identify possible understatement of expense with regard to noncurrent assets, ananalyst would most
likey beware management's discretion to:
A. Accelerate depreciation
B. Increase the residual value
C. Reduce the expected useful like
16.
A sudden rise in inventory balances is likely to warning sign of:
A. Understated expenses
B. Accelerated revenue recognition
C. ineffient working capital management
17.
A warning sign that a company may deferring expenses is sales revenue growing at a shower rate that:
A. Unearned revenue
B. noncurrent liabilities
C. property, plant and equipment
Explanation / Answer
Cash collected from customers is least likely to differ from sales due to change in: Deffered revenue
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