Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 9, Problem 2QE
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Explain the way in which the concept of risk and internal control are related.
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Choose the correct. Which of the following is not necessarily true for an operating segment?a. An operating segment earns revenues and incurs expenses.b. The chief operating decision maker regularly reviews an operating segment to assess performance and make resource allocation decisions.c. Discrete financial information generated by the internal accounting system is available for an operating segment.d. An operating segment regularly generates a profit from its normal ongoing operations.
What criteria determine whether a company can recognize revenue over time?
Which of the following is not one of the criteria for revenue recognition? (Assume the company reports using ASPE.)
a.Economic benefits will probably flow to the seller.
b.Significant risks and rewards of ownership have been transferred.
c.Continuing managerial involvement does not exist.
d.Customers have an excellent credit rating.
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Financial Reporting, Financial Statement Analysis and Valuation
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- The Question is: True or False & Why?: Comparability across companies will be enhanced since ASC 606 provides clear rules, by industry, for when and how to recognize revenue. Why the answer is "false"?arrow_forwardHow does the timing of revenue recognition impact a company's financial statements and profitability?arrow_forwardMaximizing revenue should be the goal of the firm Select one: a. True b. Falsearrow_forward
- True or False & Why? : Comparability between businesses will be improved since ASC 606 establishes clear standards for when and how to recognize revenue by industry.arrow_forwardIn conducting a B/C analysis, (a) why is it usually necessary to take a specific viewpoint in categorizing cost, benefit, disbenefit estimates; and (b) what are two specific viewpoints that you can identify if the situation is a financial transaction between you and another person? Between your company and an international customer?arrow_forwardWhich of the accounting controls ensure that a company's resources are used efficiently and economically? Select one: a. All of the available choices b. Making use of any payment discounts that are available c. Paying bills on time Od. Bidding for suppliersarrow_forward
- Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales. Group of answer choices. True Falsearrow_forwardWhich of the following is not necessarily true for an operating segment?a. An operating segment earns revenues and incurs expenses.b. The chief operating decision maker regularly reviews an operating segment to assess performance and make resource allocation decisions.c. Discrete financial information generated by the internal accounting system is available for an operating segment.d. An operating segment regularly generates a profit from its normal ongoing operations.arrow_forwardTo measure the financial viability of a proposed business, which is the more powerful measure- profitability, liquidity, solvency or payback period? Support your answer with clear examples.arrow_forward
- Financial statement analysis is a process conducted by internal and external parties to gain a better understanding of how a company is performing. For internal users, financial performance is examined to determine their respective companies' well- being and standing. For external users, financial performance is analysed to determine potential investment opportunities and to determine if a company is worth their while. Despite financial statement analysis being widely used, it does not fail to deal with limitations. Hence, in your own words and understanding, and relevant examples, discuss THREE (3) limitations of using financial statement analysis in evaluating a company's financial performance. (15 Marks)arrow_forwardListed below are several information characteristics and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application. (Items a through k may be used more than once or not at all.) Economic entity assumption g. Matching principle Going concern assumption h. Full disclosure principle Monetary unit assumption i. Relevance characteristic Periodicity assumption j. Reliability characteristic Historical cost principle k. Consistency characteristic Revenue recognition principle ____ 1. Stable-dollar assumption (do not use historical cost principle). ____ 2. Earning process completed and realized or realizable. ____ 3. Presentation of error-free information with representational faithfulness. ____ 4. Yearly financial reports. ____ 5. Accruals and deferrals in the adjusting and closing process. (Do not use going concern.) ____ 6. Useful standard measuring unit for business…arrow_forwardAre the financial reports contained in the annual report considered financial accounting reports or management accounting, clarify this and provide evidence to prove it? Can the costs contained in the income statement be used to analyze the relationship between cost, volume and profit (CVP), if the answer is yes, then the tools that can be used in this CVP analysis are clarified, and if this analysis cannot be used, the reasons will be clarified?arrow_forward
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