Accounting Which of the following IS an example of an accounting-based earnings management (EM) strategy designed to increase reported earnings? Failing to take the appropriate impairment charge on property, plant and equipment 1. Reducing expenditures on R&D Unusually high deferred revenues Unusually low cash flow from operations 2. 3. 4.

Accounting Which of the following IS an example of an accounting-based earnings management (EM) strategy designed to increase reported earnings? Failing to take the appropriate impairment charge on property, plant and equipment 1. Reducing expenditures on R&D Unusually high deferred revenues Unusually low cash flow from operations 2. 3. 4.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 7QE

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Which of the following IS an example of an accounting-based earnings management (EM) strategy designed to increase reported earnings? 1. Reducing expenditures on R&D 2. Unusually high deferred revenues 3. Failing to take the appropriate impairment charge on property, plant and equipment 4. Unusually low cash flow from operations
The primary purpose of showing special types of eventsseparately in the income statement is to:a. Increase earnings per share.b. Assist users of the income statement in evaluating theprofitability of normal, ongoing operations. c. Minimize the income taxes paid on the results of ongo-ing operations. d. Prevent unusual losses from recurring.
When using EBITDA instead of net income to measure a firm’s operational characteristics, why are depreciation and amortization expense added back? Depreciation and amortization expense represent expenses from an accounting standpoint but don’t represent actual cash outflows. Depreciation and amortization expense represent an insignificant cash outflow for a business. Depreciation and amortization expense are superficial. Depreciation and amortization expense are random numbers and can be ignored.
IDENTIFY THE EFFECT OF THE FOLLOWING TRANSACTION TO THE RISK OF MATERIAL MISSTATEMENT TO FINANCIAL STATEMENTS. The company has shown an ability to generate a positive cash flow from operations, while reporting earnings and earnings growth. Does it have a: A. INCREASE effect B. DECREASE effect C. NO EFFECT effect
Which of the following is not a limitation of the income statement? a. Comparability between companies may suffer because companies don't have enough leeway to choose between accounting methods. b. The use of different formats by companies within the same industry may hide differences in operating results. c. The use of functional classifications, instead of activity classifications, for operating expenses may not provide sufficient information for predicting future cash outflows. d. The matching of allocated historical costs against current revenues may not provide an accurate measure of a return on capital.
Which of the following is not correct with respect to accrual accounting? Accrual accounting can produce large discrepancies between the firm’s reported profit performance and the amount of cash generated from operations. The principles that govern revenue and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cash-basis accounting. Reported accrual accounting net income for a period always provides an accurate picture of underlying economic performance. Accrual accounting does not decouple measured earnings from operating cash inflows and outflows.
explain how Value drivers are related to financial statement analysis and explain their behavior over time. Can a company reply on net income as a valid measure of cash needed to pay fixed charges? Explain you answer Explain why companies do not include principle payment requirement when calculating earnings to fixed charges ratio.
Which of the following is not a form of earnings management? a) Reporting fictitious transactions b) Changes in accounting assumptions c) Timing revenue recognition d) Write-downs of operating assets
Which of the following assumptions is embodied in the AFN equation? a. All balance sheet accounts are tied directly to sales. b. Common stock and long-term debt are tied directly to sales. c. Last year's total assets were not optimal for last year's sales. d. Fixed assets, but not current assets, are tied directly to sales. e. Accounts payable and accruals are tied directly to sales.
Which of the following statements is true about the Days' Cash on Hand ratio? a.It is not useful in comparing different businesses to one another. b.It may be useful in determining whether a business is able to meet its cash commitments. c.It uses all current assets in the numerator of the ratio. d.The only operating expense used in the denominator of the ratio is depreciation expense
please answer all parts please do not say about your guidelines in detail with explanation computation formulas thanks 2. For each transaction below, write the net effect on Current Assets (CA), Current Liabilities (CL), Gross Profit (GP), Net Income Before Taxes (NIBT), and Cash flows from operating activities (CFO). - Ignore income tax effects - Write only the effect for the current period. - Assume the companyis a merchandising firm. - Assume warranty expenses are recognized in COGS and bad debt expenses are recognized in SG\&A. - If the net effect is negative, include a negative sign. - If no effect, write 0 . - Note that this is not a balance sheet equation(A=L+E)table, so you should not expect amounts to balance.
Change in Accounting Policy, Change in Estimate, Correction of Error For each of the following situations, identify whether the situation should be considered a change in estimate, change in policy, or correction of an error. Identify also whether the required adjustment should be made retrospectively or prospectively. 1. The benefits received from a piece of equipment were determined to be different than originally anticipated, so the company changed from straight-line depreciation to double- declining balance. 2. In the past, the company used the cash basis of accounting, but this year is switching to the accrual basis of accounting. 3. The company decided that using the average cost method to value inventory would be reliable and more relevant than the FIFO method currently used. 4. The anticipated residual value of a piece of equipment was deemed to be not as large as originally estimated.