ACC 573 Final Exam Guide

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1. To calculate a company's average tax rate an analyst would
2. The accumulated benefit obligation measures
3. The major difference between accounting for pensions and the
accounting for other postretirement benefits is that firms
4. Which of the following is not part of the balance sheet approach
when computing income tax expense?
5. The assessment of earnings quality is best accomplished through
the use of which one of the following?
6. Firm's choices and estimates within U.S. GAAP should be
determined by
7. The date on which a firm commits itself to a formal plan to
dispose of a segment is the
8. Which of the following statements does not apply to preventing
garbage in, garbage out when implementing a forecasting game
plan
9. Nichols and Wahlen's 2004 study showed that superior
forecasting provides the potential to earn superior security returns.
Nichols and Wahlen's findings indicate
10. Common-size financial statements recast each statement item as
11. Financial statement forecasts rely on additivity within financial
statements and articulation across financial statements. Given this
information sales growth forecasts will most likely affect growth in
12. Equity-based valuation models are based on all metrics except
13. If a firm has a market beta of 0.9, is subject to an income tax rate
of 35 percent, has a risk-free rate of 6 percent, a market risk premium
of 7 percent, and has a market value of debt to market value of equity
ratio of 60 percent, what does the market expect the firm to generate
in terms of equity returns using CAPM?
14. Equity valuation models based on dividends, cash flows, and
earnings have been the topic of many theoretical and empirical
research studies in recent years. All of the following are true
regarding these studies except:
15.
A disadvantage of the free cash flow valuation method i
16.
17.
Operating assets include all of the following except
18. The conceptual framework for free cash flows separates the
balance sheet equation into the following categories:
19. If an analyst wants to value a potential investment in the net
operating assets of a division of another firm, the analyst should
discount the projected free cash flows at the
20. Residual income in a long-run steady-state growth period is
referred to as:
21. The two most popular discounted earnings models appear to be
22. Residual income is
23. The market price of a share of common equity reflects
24. Strictly speaking, the price-earnings ratio assumes that firm value
is the
25. Valuation using market multiples captures
26. Under the value-to-book model new projects will be abnormally
profitable only when
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ACC 573 Midterm Exam Guide

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ACC 573 Midterm Exam Guide
1. The two categories of shareholders' equity usually found on the
balance sheet of a corporation are
2. When a firm attempting to create unique products or services for
particular market niches, in order to achieve relatively high profit
margins, this is best known as
3. Which of the following economic characteristics is consistent
with a pharmaceutical company?
4. Which of the following economic characteristics is consistent
with a commercial bank?
5. Which of the following assets appears on the balance sheet at
fair value?
6. The use of acquisition cost as a valuation method is justified on
the basis that acquisition cost is:
7. U.S. GAAP, IFRS, and other major accounting standards are
best characterized as
8. Toro Company recognized $655,000 of cost of goods sold in
2010, in addition its implementation of a just-in-time inventory
system allowed it to reduce its inventory from $325,000 at the
beginning of the year to $230,000 at the end of 2010. How much cash
did Toro spend for inventory in 2010?
9. Free cash flows to all debt and common equity shareholders
represents the excess of cash flows from
10. Normally, cash flows from financing will start using cash during
which phase of the product life cycle?
11. When preparing the statement of cash flows using the indirect
method, an increase in inventories would appear as
12. Which of the following scenarios is consistent with a increasing
cost of goods sold to sales percentage and increasing inventory
turnover
13. Which of the following industries would you expect to have, on
average, high asset turnover and low profit margin?
14. One important difference between return on assets (ROA) and
return on common shareholders equity (ROCE) is
15. Sustainable earnings represent
16. Non-U.S. companies that list securities in the United States
typically include a risk factors item in the:
17. Economic theory teaches that differences in market returns must
relate to differences in
18. One common problem with the current ratio is that it is
susceptible to "window dressing." If prior to the end of the accounting
period Saxon Company has a current ratio of 1.5 and management
wishes to boost its current ratio it may decide to
19. Which kind of dividends have an interest-bearing promise to pay
dividends?
20. Which of the following is the date on which a company
determines the owners of the stock that will receive a dividend?
21. Which of the following is the typical tradeoff when issuing
preferred stock?
22. An analyst can estimate the average total life of depreciable
assets by
23. Which of the following is the least effective way for an analyst to
understand whether existing long-lived assets must be replaced?
24. When a foreign entity has the U.S. dollar as its functional
currency, it uses which exchange rate to translate monetary assets and
liabilities?
25. The method used to account for oil and gas exploration costs that
capitalizes the exploration costs of productive wells is the
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ACC 573 Week 1 DQ 1

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Based on your review of the SEC reporting requirements as outlined
in the Sarbanes-Oxley Act, assess the adequacy of the reporting
requirements for providing credible financial and operating
information for company stakeholders and potential investors,
indicating any gaps identified in the reporting. Provide support for
your rationale.
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 ACC 573 Week 1 DQ 2
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Assess how the GAAP and IFRS convergence project has impacted
SEC reporting requirements, predicting the long-term impact of the
convergence on reporting. Provide a rationale for your prediction.
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ACC 573 Week 2 DQ 1

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As a CFO of a publically traded company, suggest how you would
create an ethical environment to ensure account balances are correctly
valued and reported so that information is reliable for users. Provide
support for your rationale.
Assess the ethical requirements as outlined in the Sarbanes-Oxley
Act, indicating whether or not you believe the requirements are
adequate to ensure integrity in financial accounting and reporting
activities. Suggest improvements that may be needed while providing
support for your rationale.
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ACC 573 Week 2 DQ 2

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In todays business environment where publicly traded companies
feel pressure to meet short-term earnings expectations, management
may be tempted to manage earnings. Assess how a financial
statement user may be able to detect managed earnings when
reviewing the firms balance sheet, income statement, and cash-flow
statement. Indicate how a potential investor might interpret these
red-flags. Provide support for your rationale.
Assess how the Sarbanes-Oxley Act addresses the concern of
corporate managed earnings, indicating whether or not you believe
the requirements within the Act are sufficient to minimize these
concerns. Provide support for your rationale.
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ACC 573 Week 3 Assignment 1 Financial Statement

Restatement and Ethics
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Write a two to three (2-3) page paper in which you:

Assess the factors that contributed to the financial statement
restatement, signifying the executive management teams attitude
toward the restatement. Suggest how the restatement may have been
avoided during the initial reporting process.
Explain the impact to the companys stock price when the restatement
was released and to future earnings forecast, indicating whether or not
you believe the impact to the stock price was justified.
Evaluate the restatement in terms of managements ethical violations
according to the requirements of the Sarbanes-Oxley Act, providing
recommendations to management on how to avoid these problems in
the future. Provide support for your recommendations.
Use at least two (2) quality academic resources in this assignment.
Note: Wikipedia and other Websites do not quality as academic
resources.
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ACC 573 Week 3 DQ 1

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As part of the Sarbanes-Oxley Act, corporate officers are no longer
able to pass the buck of responsibility for ensuring adequate
controls over financial statements and reporting activities thus
ensuring the accuracy of financial statements. Assess the adequacy of
the provisions contained within the Act, indicating whether or not you
believe requirements will improve the accuracy of financial
statements and reporting. Provide support for your rationale.
Given the requirements contained in the Act for CEO and CFOs to
certify the adequacy of controls and financial statement accuracy,
evaluate your comfort level with this requirement should you become
a CFO of a publically traded company. Provide support for your
rationale.
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ACC 573 Week 4 DQ 1

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Based on your review of the current requirements of the SEC and
FASB, assess the adequacy of the guidelines for ensuring the
transparency of off-balance-sheet transactions to investors, indicating
where improvements may still be needed. Provide support for your
rationale.
As a CFO of a publically traded company, evaluate the pros and cons
of using off-balance-sheet financing, including a recommendation as
to whether or not you support using these types of arrangements.
Provide support for your recommendation.
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ACC 573 Week 4 DQ 2

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Based on the information found in the e-Activity, assess the key
differences between U.S. GAAP and IFRS reporting for the testing of
asset impairment and the requirement to write down the asset value.
Indicate whether or not you support the U.S. GAAP or IFRS
approach. Provide support for your position.
As an investor, recommend a strategy for evaluating long-lived asset
values contained on the balance sheet of a publically traded company
so as to minimize the risk to the investor. Provide support for your
strategy.
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ACC 573 Week 5 DQ 1

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Create an argument for the use of Fair Market Accounting as opposed
to historical cost. Provide support for your argument.
Evaluate the effectiveness of the accounting principle guidelines for
determining the market value of an asset, indicating improvements to
these guidelines. Provide support for your recommendations.
Create an argument for the use of Fair Market Accounting as opposed
to historical cost. Provide support for your argument.
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ACC 573 Week 5 DQ 2

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Assess the risks associated with derivatives instruments, indicating
how these risks may be minimized for a publically traded company.
Provide support for your rationale.
As an investor, assess the potential financial concerns to be raised
when reviewing the financial statements of a publically traded
company containing derivative instruments providing a
recommendation for how the concerns may be identified and
addressed. we have to get ACC 573 DQs tomorrow and ACC 575 all
quizzes+ one assignment
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ACC 573 Week 6 DQ 1

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The Sarbanes-Oxley (SOX) Act was created with the intent of
improving the quality of accounting, reliability of financial statements
to investors, and providing oversight to accounting professionals
through the creation of a new federal agency, Public Accounting
Company Oversight Board (PACOB). Create an argument supporting
whether SOX achieved these goals, and whether financial data
reported today is more accurate and reliable than prior to the Act.
Provide support for your rationale.
Assess the impact to the Public Accounting Profession with the
creation of the PACOB and the inability of the profession to be self-
regulated. Indicate your level of support for the federal regulation of
the profession. Provide a rationale for your response.
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ACC 573 Week 6 DQ 2

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Assess the impact to public trust when a publically traded company
restates its financial data, indicating how negative impressions may be
minimized. Provide support for your rationale.
Evaluate the current trend of companies restating financial statements.
Indicate the key drivers of this trend. Predict the trend over the next
five years, providing support for your rationale.
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ACC 573 Week 7 Assignment 2 Accounting Quality

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Write a four to five (4-5) page paper in which you:
Assess the roles of the Board of Directors and Chief Executive
Officer of a public company for establishing an ethical environment
that generates quality accounting and reliable financial reporting for
use by shareholders and investors. Provide support for your
assessment.
Recommend a strategy for a CEO to implement, leading to an ethical
environment that leads to high-quality accounting, reporting, and
forecasting. Provide support for your recommendation.
Suggest how corporate management can provide assurances to
investors that the performance forecast and expected earnings will be
realized, minimizing the volatility of the stock price. Provide support
for your suggestions.
Evaluate the consequences to a publically traded company when there
is a lack of quality within financial accounting and reporting,
indicating how these consequences may be minimized. Provide
support for your answer.
Assess the requirements of the Sarbanes-Oxley Act related to
accounting quality, indicating whether or not you believe the
requirements are sufficient to protect stockholders and potential
investors. Provide support for your position.
Use at least five (5) quality academic resources in this assignment.
Note: Wikipedia and other Websites do not quality as academic
resources.
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ACC 573 Week 7 DQ 1

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Assess the financial performance forecasting process, identifying the
assumptions made that are most likely to cause a gap between the
forecast and actual performance. Indicate how these gaps may be
minimized. Provide support for your rationale.
Create an argument supporting the value of forecasting to an
organization. Provide support for your argument
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ACC 573 Week 7 DQ 2

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Assess the market and shareholder behaviors when a publically traded
company makes the decision not to pay dividends to its shareholders,
suggesting how management should react to these behaviors. Provide
support for your rationale.
Evaluate the factors that an investor may consider when deciding
whether or not to invest in a company with a policy of non-dividend
payments. Indicate whether or not you believe this a prudent choice
for some investors. Provide support for your rationale.
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ACC 573 Week 8 DQ 1

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Create an argument that use of the present value free cash-flow
method has a more beneficial economic meaning than earnings-based
methods. Provide support for your argument.
Assess the challenges related to using the present value of the free
cash-flow valuation method in practice, suggesting how each of these
challenges may be overcome. Provide support for your rationale.
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ACC 573 Week 8 DQ 2

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Assess how the free cash-flow method can be used when a company
is profitable yet the cash-flow values are expected to be negative over
the next five years, indicating the likely impact on the valuation.
Provide support for your rationale.
Assess which cash-flow variables are the most sensitive to change and
the likely impact on a firms valuation. Provide support for your
answer.
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ACC 573 Week 9 DQ 1

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Create an argument supporting that using the earnings-based
valuation method yields the most accurate results. Provide support for
your argument.
Assess the challenges related to using the earnings-based valuation
method in practice, suggesting how each of these challenges may be
overcome. Provide support for your rationale
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ACC 573 Week 9 DQ 2

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Evaluate the likely impact on a firms valuation when using U.S.
GAAP versus IFRS accounting methods, indicating which accounting
standards you believe may yield a more favorable result. Provide
support for your position.
Determine how a firms valuation using the earnings-based valuation
method would be impacted when using aggressive versus
conservative accounting. Provide evidence supporting your
conclusion.
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ACC 573 Week 10 Assignment 3 Company Valuation

(Facebook IPO)
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Write a five to six (5-6) page paper in which you:
Evaluate the valuation and method used to determine the Initial Public
Offering value of Facebook stock, indicating any miscalculations in
the valuation that may have mislead potential investors and how these
errors may have been minimized. Provide support for your response.
Assess the performance of the stock within the first year of the public
offering, indicating the drivers of the performance and the resulting
impact to the company performance.
Suggest an alternative method of valuation for the company valuation
indicated and how it may have yielded a different value and the
potential resulting impact to investor decision. Provide support for
your rationale.
Assess the role of the Chief Executive Officer in relationship to the
stock performance, suggesting what the person in that role may have
done differently to positively influence the performance of the stock
and value to investors. Provide support for your suggestions.
Evaluate the risk / reward position to an investor when purchasing
stock during an initial public offering, indicating under what
circumstances you would advise an investor to do so.
Predict the stock price of Facebook over the next five years,
indicating the key drivers of the performance and the resulting impact
to the stock price. Provide support for your prediction.
Use at least five (5) quality academic resources in this assignment.
Note: Wikipedia and other Websites do not quality as academic
resources.
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ACC 573 Week 10 DQ 1

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Create an argument supporting that using the market-based
valuation method yields the most accurate results. Provide support for
your argument.
 Assess the challenges related to using the market-based
valuation method in practice, suggesting how each of these challenges
may be overcome. Provide support for your rationale.
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