Question 1

Regulation FD requires companies to do which one of the following when disclosing material nonpublic information?
A)advise the SEC 7 working days prior to such disclosure
B)disclose the information without preference to any party or parties
C)only disclose the information to professional analysts
D)only disclose the information after a 7-day advance notice of an announcement
E)disclose the information only after a 24-hour delay

Accepted Answer

Regulation FD requires companies to disclose material nonpublic information to the public without preference to any party or parties, in order to promote fair and equal access to information. The other choices listed are not requirements under Regulation FD.

Question 2

Which one of the following provides information on a firm's assets and liabilities as of a particular date?
A)cash flow statement
B)pro forma income statement
C)income statement
D)tax return
E)balance sheet

Accepted Answer

The balance sheet provides information on a firm's assets and liabilities as of a particular date. The cash flow statement reports the inflows and outflows of cash for a particular period of time, the pro forma income statement predicts future earnings, the income statement reports revenue and expenses over a given period, and the tax return reports the company's taxable income and tax liabilities for a specific year.

Question 3

Investment cash flow is defined as which one of the following?
A)revenue minus expenses
B)cash flow from the purchases and sales of fixed assets and investments
C)cash flow originating from the issuance of securities
D)cash generated by a firm's normal business activities
E)pretax income

Accepted Answer

Investment cash flow is the cash generated or used by a firm for the purchases and sales of fixed assets and investments. Revenue minus expenses (option A) is net income, cash flow originating from the issuance of securities (option C) is financing cash flow, cash generated by normal business activities (option D) is operating cash flow, and pretax income (option E) is a measure of profitability but does not specifically refer to cash flow.

Question 4

Income and expense items NOT realized in cash form are referred to as which one of the following?
A)deductible expenses
B)noncash items
C)intangible assets
D)operating income
E)financing activities

Accepted Answer

Income and expense items that are not realized in cash form are referred to as noncash items. This includes items such as depreciation, amortization, and stock-based compensation. Deductible expenses refer to expenses that can be subtracted from taxable income, intangible assets refer to nonphysical assets such as patents or trademarks, operating income refers to income generated from a company's core business activities, and financing activities refer to activities related to obtaining or repaying debt or equity financing.

Question 5

How frequently do corporations file 10K reports with the SEC?
A)monthly
B)quarterly
C)semiannually
D)annually
E)only when the firm engages in a merger or an acquisition

Accepted Answer

Corporations file 10K reports with the SEC annually. This comprehensive report provides a detailed overview of the company's financial condition and operations over the past year.

Question 6

Which one of the following is defined as anything a firm owns that has value?
A)equity
B)asset
C)liability
D)cash inflow
E)cash outflow

Accepted Answer

An asset is anything a firm owns that has value. Equity represents ownership in the firm, liability represents debts or obligations owed by the firm, and cash inflow/outflow represent the movement of money into and out of the firm.

Question 7

Which one of the following is an analysis of a firm's sources and uses of cash over a period of time?
A)income statement
B)pro forma income statement
C)cash flow statement
D)tax return
E)balance sheet

Accepted Answer

A cash flow statement analyzes a company's sources and uses of cash over a specific period of time, whereas an income statement shows a company's total revenues and expenses over a period of time. A pro forma income statement projects future revenue and expenses, a tax return is a document filed with the government for tax purposes, and a balance sheet shows a company's assets, liabilities, and equity at a specific point in time.

Question 8

Better Products just filed its quarterly report with the SEC. This report is referred to as which one of the following?
A)10-F
B)10-K
C)10-Q
D)EDGAR 10
E)10FD

Accepted Answer

The quarterly report filed with the SEC is referred to as a 10-Q. Choice A is incorrect because a 10-F is an annual report filed by foreign private issuers. Choice B is incorrect because a 10-K is an annual report filed by domestic issuers. Choice D is incorrect because there is no such thing as an EDGAR 10. Choice E is incorrect because there is no such filing as a 10FD.

Question 9

Material nonpublic information is defined as any information that could reasonably be expected to do which one of the following?
A)affect the price of the firm's securities
B)cause great embarrassment to the firm
C)cause one or more of the senior executives of the firm to resign
D)cause the SEC to halt the trading of the firm's securities should that information become public
E)affect the manner in which the firm presents its financial information

Accepted Answer

Material nonpublic information refers to information that could affect the price of the firm's securities if it were to become publicly known. This includes information about a company's financial performance, merger and acquisition activity, changes in senior management, and other significant events that could impact the company's future prospects. Choosing B, C, D, or E is incorrect as they do not universally apply to all material nonpublic information.

Question 10

Which one of the following is a financial planning method wherein some account values vary in relation to expected sales?
A)common size approach
B)linear method
C)percentage of net income method
D)adjusted sales method
E)percentage of sales approach

Accepted Answer

The percentage of sales approach is a financial planning method where some account values vary in relation to expected sales. This method assumes that certain expenses or accounts, such as cost of goods sold or advertising, are directly related to the level of sales. These accounts are then calculated as a percentage of expected sales. This helps in forecasting the financial requirements of a company based on its expected sales volume.

Question 11

Which one of the following is used to pay dividends or kept as retained earnings by a firm?
A)equity
B)net cash flow
C)revenue
D)net income
E)expense

Accepted Answer

Net income is the profit earned by a company after deducting all the expenses. It is the amount that can be used to pay dividends to shareholders or kept as retained earnings for future investments.

Question 12

Return on equity is equal to which one of the following?
A)dividend yield divided by total equity
B)retained earnings divided by total equity
C)revenue divided by total equity
D)net income divided by total equity
E)operating cash flow divided by total equity

Accepted Answer

Return on equity (ROE) measures the amount of net income earned per dollar of shareholders' equity. Therefore, the correct formula to calculate ROE is net income divided by total equity. Option D is the only one that includes net income in the calculation.

Question 13

Pro forma financial statements are based on which one of the following?
A)projected future income, cash flows, and other noncash items
B)historical revenue and expenses
C)historical asset and liability values
D)current period cash flows
E)current period revenues and expenses

Accepted Answer

Pro forma financial statements are based on projected future income, cash flows, and other noncash items. This allows companies to create hypothetical financial statements that show how they expect to perform in the future based on certain assumptions and projections. Historical financial statements would not be useful for this purpose as they only show past performance. Current period cash flows, revenues, and expenses can also help inform projections, but they alone are not sufficient to create a complete pro forma statement.

Question 14

Which one of the following is an accounting statement that provides information on a firm's revenues and expenses?
A)balance sheet
B)cash budget
C)pro forma balance sheet
D)income statement
E)cash flow statement

Accepted Answer

The income statement provides information on a firm's revenues and expenses, as well as its net income or loss for a specific period of time. The balance sheet lists a firm's assets, liabilities, and equity at a specific point in time; the cash budget forecasts a firm's inflows and outflows of cash over a specific future period; the pro forma balance sheet is a projected balance sheet for a future time period; and the cash flow statement shows a firm's sources and uses of cash over a specific period of time.

Question 15

Which one of the following is an ownership interest in a firm?
A)asset
B)expense
C)net income
D)liability
E)equity

Accepted Answer

Equity represents the ownership interest in a firm. It includes stock and retained earnings, which are the profits of the company that have not been distributed to shareholders as dividends.

Question 16

Operating cash flow is referred to as which one of the following?
A)revenue minus expenses
B)cash realized from the sale of assets
C)cash flow originating from the issuance of securities
D)cash generated by a firm's normal business activities
E)pretax income

Accepted Answer

Operating cash flow is the cash generated by a firm's normal business activities, such as sales and services, and is calculated by subtracting operating expenses from revenues. Option A is net income or profit, option B is cash flow from investing activities, option C is cash flow from financing activities, and option E is not related to cash flow but rather income before taxes.

Question 17

Which one of the following is defined as income realized in cash form?
A)net income
B)revenue
C)cash flow
D)retained earnings
E)dividends

Accepted Answer

Cash flow is defined as income realized in cash form. Net income, revenue, retained earnings, and dividends may indirectly affect cash flow, but they are not the same as cash flow itself.

Question 18

Which one of the following is equal to net income expressed as a percentage of total assets?
A)return on equity
B)return on the balance sheet
C)operating yield
D)net yield
E)return on assets

Accepted Answer

Return on assets (ROA) is the ratio of net income to total assets, expressed as a percentage. This measures how efficiently a company uses its assets to generate profit.

Question 19

Which one of the following is the cash flow resulting from the payment of dividends and the issuance or repurchase of equity securities?
A)balance sheet cash flow
B)operating cash flow
C)financing cash flow
D)business cash flow
E)investment cash flow

Accepted Answer

The payment of dividends and issuance or repurchase of equity securities are both examples of financing activities, therefore resulting in financing cash flow. The other options do not accurately describe these activities.

Question 20

Which one of the following represents the amounts owed by a firm to other parties?
A)assets
B)cash inflows
C)equities
D)liabilities
E)expenses

Accepted Answer

Liabilities represent the amounts owed by a firm to other parties, such as loans, accounts payable, and taxes owed. Assets represent what a firm owns, cash inflows represent the money coming into the firm, equities represent the ownership in the firm, and expenses represent the costs incurred by the firm.

Quiz 19: Projecting Cash Flow and Earnings

Regulation FD requires companies to do which one of the following when disclosing material nonpublic information?

Which one of the following provides information on a firm's assets and liabilities as of a particular date?

Investment cash flow is defined as which one of the following?

Income and expense items NOT realized in cash form are referred to as which one of the following?

How frequently do corporations file 10K reports with the SEC?

Which one of the following is defined as anything a firm owns that has value?

Which one of the following is an analysis of a firm's sources and uses of cash over a period of time?

Better Products just filed its quarterly report with the SEC. This report is referred to as which one of the following?

Material nonpublic information is defined as any information that could reasonably be expected to do which one of the following?

Which one of the following is a financial planning method wherein some account values vary in relation to expected sales?

Which one of the following is used to pay dividends or kept as retained earnings by a firm?

Return on equity is equal to which one of the following?

Pro forma financial statements are based on which one of the following?

Which one of the following is an accounting statement that provides information on a firm's revenues and expenses?

Which one of the following is an ownership interest in a firm?

Operating cash flow is referred to as which one of the following?

Which one of the following is defined as income realized in cash form?

Which one of the following is equal to net income expressed as a percentage of total assets?

Which one of the following is the cash flow resulting from the payment of dividends and the issuance or repurchase of equity securities?

Which one of the following represents the amounts owed by a firm to other parties?