ACCOUNTING 4356 EXAM 2 UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
1. Cash flow assessment plays a central role in analyzing:
the credit risk of a company.
management's effectiveness.
the future earnings potential of a company.
the firm's investment potential.
Answer:
a
Question:
2. A component that is valuation-relevant, but is not
expected to persist into the future is a:
permanent earnings component.
transitory earnings component.
noise component.
quiet component.
Answer:
b
Question:
3. Income from continuing operations, excluding special or
nonrecurring items, is generally regarded as:
permanent earnings.
transitory earnings.
value-irrelevant earnings.
abnormal earnings.
Answer:
a
Question:
4. Income or loss from discontinued operations is regarded
as:
permanent earnings.
transitory earnings.
value-irrelevant earnings.
abnormal earnings.
Answer:
b
,Question:
5. An adjustment to income due to a non-recurring item is
regarded as:
permanent earnings.
transitory earnings.
value-irrelevant earnings.
abnormal earnings.
Answer:
d
Question:
6. Reported earnings numbers often contain three distinctly
different components possibly subject to different
earnings capitalization rates. Which of the following is not
one of these components?
A permanent earnings component.
A transitory earnings component.
A restructured earnings component.
A value-irrelevant earnings component.
Answer:
c
Question:
7. Which one of the following is an example of sustainable
earnings?
Loss from debt retirement.
Expenditures for advertising.
Earnings from repeat customers.
Gain from corporate restructuring.
Answer:
c
Question:
8. The interest rate on a revolving loan will usually:
be below the prime interest rate.
be equal to the prime interest rate.
remain fixed.
float.
Answer:
d
, Question:
9. Short-term notes sold directly to investors by large,
highly rated companies are called:
commercial paper.
secured notes.
bonds.
debentures.
Answer:
a
Question:
10. A bond that is considered unsecured is referred to as a:
debenture.
sinking fund bond.
senior bond.
callable bond.
Answer:
a
Question:
11. A qualitative assessment of the business, its customers
and suppliers, and management's character and
capability is known as:
covenant waivers.
due diligence.
indenture evaluation.
a debenture.
Answer:
b
Question:
12. The degree to which cash needs can be satisfied during
periods of fiscal stress is known as:
credit availability.
credit worthiness.
working capital.
financial flexibility.
Answer:
d
QUESTIONS AND CORRECT ANSWERS
Question:
1. Cash flow assessment plays a central role in analyzing:
the credit risk of a company.
management's effectiveness.
the future earnings potential of a company.
the firm's investment potential.
Answer:
a
Question:
2. A component that is valuation-relevant, but is not
expected to persist into the future is a:
permanent earnings component.
transitory earnings component.
noise component.
quiet component.
Answer:
b
Question:
3. Income from continuing operations, excluding special or
nonrecurring items, is generally regarded as:
permanent earnings.
transitory earnings.
value-irrelevant earnings.
abnormal earnings.
Answer:
a
Question:
4. Income or loss from discontinued operations is regarded
as:
permanent earnings.
transitory earnings.
value-irrelevant earnings.
abnormal earnings.
Answer:
b
,Question:
5. An adjustment to income due to a non-recurring item is
regarded as:
permanent earnings.
transitory earnings.
value-irrelevant earnings.
abnormal earnings.
Answer:
d
Question:
6. Reported earnings numbers often contain three distinctly
different components possibly subject to different
earnings capitalization rates. Which of the following is not
one of these components?
A permanent earnings component.
A transitory earnings component.
A restructured earnings component.
A value-irrelevant earnings component.
Answer:
c
Question:
7. Which one of the following is an example of sustainable
earnings?
Loss from debt retirement.
Expenditures for advertising.
Earnings from repeat customers.
Gain from corporate restructuring.
Answer:
c
Question:
8. The interest rate on a revolving loan will usually:
be below the prime interest rate.
be equal to the prime interest rate.
remain fixed.
float.
Answer:
d
, Question:
9. Short-term notes sold directly to investors by large,
highly rated companies are called:
commercial paper.
secured notes.
bonds.
debentures.
Answer:
a
Question:
10. A bond that is considered unsecured is referred to as a:
debenture.
sinking fund bond.
senior bond.
callable bond.
Answer:
a
Question:
11. A qualitative assessment of the business, its customers
and suppliers, and management's character and
capability is known as:
covenant waivers.
due diligence.
indenture evaluation.
a debenture.
Answer:
b
Question:
12. The degree to which cash needs can be satisfied during
periods of fiscal stress is known as:
credit availability.
credit worthiness.
working capital.
financial flexibility.
Answer:
d
