CFA Domain 4: Financial Statement Analysis (Quiz 1) Welcome to your CFA Practice Quizzes. Note: We designed Two (2) parts of practice quizzes for this Domain. Each part has 20 questions. CFA Domain 4: Financial Statement Analysis. (Quiz 1) Please click NEXT to start your Free CFA Practice Quizzes right away. Best of Luck! 1. Which of the following statements is most accurate regarding financial reporting standard-setting bodies and regulatory authorities? The Securities and Exchange Commission (SEC) sets financial reporting standards. The Financial Accounting Standards Board (FASB) sets financial reporting standards. The International Accounting Standards Board (IASB) enforces financial reporting requirements. None 2. "An analyst gathers the following information: Based on this information, and assuming there are no other current assets, the company with the largest quick ratio is most likely:" Company X Company Y Company Z None 3. Which of the following is most likely a general reporting requirement under IFRS? Financial statement accounts must be offset (netted). Financial statements must be prepared at least quarterly. Prior period financial information must be included for comparison. None 4. If a company repurchases shares of its own common stock, then the company most likely: maintains voting rights. continues to receive dividends. decreases total owners' equity. None 5. When a company purchases treasury stock: assets and equity increase. assets and equity decrease. assets decrease and equity increases. None 6. A company that reports under US GAAP presents its 20X3 deferred tax assets valuation allowance at $10,000. In 20X4, it is reported at $0. All else equal, the reduction in the valuation allowance most likely signals that the company expects: higher taxes payable. lower taxable income. lower statutory tax rates. None 7. "At the beginning of 20X2, a company reporting under US GAAP purchases a patent for USD 20 million with no residual value and a useful life of 10 years. At the end of 20X3, the company determines that the patent's expected cash generation is lower due to changes in the law. It estimates the following: If the company uses straight-line amortization, the 20X3 impairment charge the company records is closest to:" USD 6 million. USD 7 million. USD 8 million None 8. With respect to the cash flow statement, dividends paid can be most appropriately classified as an: investing activity under IFRS. operating activity under IFRS. operating activity under US GAAP. None 9. Unlike companies that comply with US GAAP, a company reporting under IFRS can disclose in its financial statements the amount of: LIFO reserves. an inventory write-down. a reversal of an inventory write-down. None 10. If inventory unit costs are increasing, a LIFO liquidation will least likely result in a(n): increase in tax expense. decrease in operating profit. decrease in cost of goods sold. None 11. "An analyst reviews a company's fiscal year-end common-size income statement: There are no other operating costs. If the annual research and development expense is ¥150 billion, then the company's operating profit is closest to:" ¥1,829 billion ¥1,899 billion ¥1,979 billion None 12. "An analyst completes the following DuPont analysis on two companies: Compared with Company Y, Company X mostly likely has a:" lower ROE and is more efficient. higher ROE and has a higher profit margin. higher ROE and a higher proportion of debt None 13. An increase in the statutory tax rate will most likely: increase both deferred tax assets and deferred tax liabilities. increase deferred tax assets and decrease deferred tax liabilities. decrease deferred tax assets and increase deferred tax liabilities. None 14. A company reporting under US GAAP leases a factory building under a long-term operating lease contract. On the income statement, the ongoing expenses pertaining to the lease should most appropriately be reported: in equal amounts each period, under a single line item. in different amounts each period, under a single line item. in different amounts each period, under depreciation expense and interest expense. None 15. "An analyst collects the following information about a company: For the year ended 20X5, the company's total asset turnover (TAT) is closest to:" 6 7 8 None 16. A company prepares its statement of cash flows using the indirect method. Which section of the statement of cash flows will interest expense most likely impact? Cash from investing activities Cash from financing activities Cash from operating activities None 17. In 20X7, a firm reported earnings before interest and taxes (EBIT) of €32.2 million, interest expense of €3.5 million on its income statement, and interest paid of €3.1 million on its cash flow statement. The footnotes also revealed that if the firm had no capitalized interest in 20X7, depreciation expense would change by €450,000. After factoring in all effects of capitalized interest, the analyst recalculated the interest coverage ratio to be 7.5 times. The amount of capitalized interest reported by the firm in 20X7 is closest to: €730,000 €760,000 €850,000 None 18. Income statement elements most likely reflect: values at a point in time. performance over a certain period. inflows and outflows of cash transactions. None 19. An auditor for a US publicly traded company most likely expresses an opinion on a company's: strategy execution. internal control system. pro forma financial statements. None 20. Expenses shown on the income statement are least appropriately grouped by: nature. liquidity. function. None 1 out of 20 Time is Up! Time's up
