Liste des questions

The short-term shutdown point of production for a firm operating under perfect competition will most likely occur when:

Under conditions of perfect competition, a company will break even when market price is equal to the minimum point of the:

A company will shut down production in the short run if total revenue is less than total:

A company has total variable costs of $4 million and fixed costs of $3 million. Based on this information, the company will stay in the market in the long term if total revenue is at least :

When total revenue is greater than total variable costs but less than total costs , in the short term, a firm will most likely:

Under conditions of perfect competition, in the long run, firms will most likely earn:

A firm that increases its quantity produced without any change in per-unit cost is experiencing:

A company is experiencing economies of scale when:

Diseconomies of scale most likely result from:

A firm is operating beyond minimum efficient scale in a perfectly competitive industr y. To maintain long-term viability, the most likely course of action for the firm is to:

Companies most likely have a well-defined supply function when the market structure is:

Aquarius , Inc. is the dominant company and the price leader in its market. One of the other companies in the market attempts to gain market share by undercut- ting the price set by Aquarius. The market share of Aquarius will most likely:

Over time, the market share of the dominant company in an oligopolistic market will most likely:

Based on typical labor utilization patterns across the business cycle, productivity (output per hours worked) is most likely to be highest :

As the expansion phase of the business cycle advances from early stage to late stage, businesses most likely experience a decrease in:

An analyst writes in an economic report that the current phase of the business cycle is characterized by accelerating inflationar y pressures and borrowing by companies. The analyst is most likely referring to the:

The indicator indexes created by various organizations or research agencies:

Which one of the following trends in various economic indicators is most consis tent with a recover y from a recession?

Which of the following statements gives the best description of nowcasting?

Which of the following statements is the best description of the characteristics of economic indicators?

When the spread between 10-year US Treasur y yields and the short-term federal funds rate narrows and at the same time the prime rate stays unchanged, this mix of indicators most likely forecasts future economic:

Current economic statistics indicating little change in services inflation, rising residential building permits , and increasing average duration of unemployment are best interpreted as:

If relative to prior values of their respective indicators , the inventory–sales ratio has risen, unit labor cost is stable, and real personal income has decreased, it is most likely that a peak in the business cycle:

When aggregate real personal income, industrial output, and the S&P 500 Index all increase in a given period, it is most accurate to conclude that a cyclical upturn is:

Which of the following is most likely to increase after an increase in aggregate real personal income?

Which of the following indicators is most appropriate in predicting a turning point in the economy?

The unemployment rate is considered a lagging indicator because:

During an economic recovery, a lagging unemployment rate is most likely attributable to:

Crowding out refers to a:

A contractionary fiscal policy will always involve which of the following?

Which one of the following statements is most accurate?

Which statement regarding fiscal policy is most accurate?

The least likely explanation for why fiscal policy cannot stabilize aggregate demand completely is that :

When a central bank announces a decrease in its official policy rate, the desired impact is an increase in:

Which action is a central bank least likely to take if it wants to encourage businesses and households to borrow for investment and consumption purposes?

A central bank’s repeated open market purchases of government bonds:

A prolonged period of an official interest rate very close to zero without an increase in economic growth most likely suggests:

Raising the reserve requirement is most likely an example of which type of monetary policy?

Which of the following is a limitation on the ability of central banks to stimulate growth in periods of deflation?

The least likely limitation to the effectiveness of monetary policy is that central banks cannot :

Quantitative easing , the purchase of government or private securities by the central banks from individuals or institutions , is an example of which monetary policy stance?

Which of the following statements regarding a country ’s political cooperation is most accurate?

A consequence of one of the disadvantages of globalization is that :

Which of the following outcomes is most likely a result of globalization?

A US company expanding critical spare part inventories for local customers made at its existing Canadian facility after a supply chain disruption is most likely using the coping tactic of :

An example of a geopolitical multifaceted tool for furthering national interests is:

Which of these is most likely to be described as an event risk?

Exogenous risks are best described as those that :

Which of the following statements about geopolitical threats in the investment environment is most accurate?

An applicable conclusion drawn from the Geopolitical Risk Index (GPR) is that :

The basic geopolitical risk type most likely in comparison to have the smallest degree of uncertainty is:

Which of the following statements best describes the benefits of international trade?

Which of the following statements best describes the costs of international trade?

Suppose the cost of producing tea relative to copper is lower in Tealand than in Copperland. With trade, the copper industr y in Copperland would most likely:

Which type of trade restriction would most likely increase domestic government revenue?

Which of the following trade restrictions is likely to result in the greatest welfare loss for the importing country?

A large countr y can:

If Brazil and South Africa have free trade with each other, a common trade policy against all other countries , but no free movement of factors of production between them, then Brazil and South Africa are part of a(n):

Which of the following factors best explains why regional trading agreements are more popular than larger multilateral trade agreements?

What will be the effect on a direct exchange rate quote if the domestic currency appreciates?

An executive from Switzerland checks into a hotel room in Spain and is told by the manager that EUR1 will buy CHF1.2983. From the executive’s perspective, an indirect exchange rate quote would be:

Over the past month, the Swiss franc (CHF) has depreciated 12 percent against the British pound (GBP). How much has the pound sterling appreciated against the Swiss franc?

An exchange rate between two currencies has increased to 1.4500. If the base currency has appreciated by 8 percent against the price currency, the initial exchange rate between the two currencies was closest to:

The spot ZAR/HKD cross-rate is closest to:

Another dealer is quoting the ZAR/SEK cross-rate at 1.1210. The arbitrage profit that can be earned is closest to:

A BRL/MXN spot rate is listed by a dealer at 0.1378. The six-month forward rate is 0.14193. The six-month forward points are closest to:

A three-month forward exchange rate in CAD/USD is listed by a dealer at 1.0123. The dealer also quotes three-month for ward points as a percentage at 6.8 percent. The CAD/USD spot rate is closest to:

If the base currency in a forward exchange rate quote is trading at a forward discount, which of the following statements is most accurate?

A forward premium indicates:

The JPY/AUD spot exchange rate is 82.42, the Japanese yen interest rate is 0.15 percent, and the Australian dollar interest rate is 4.95 percent. If the interest rates are quoted on the basis of a 360-day year, the 90-day for ward points in JPY/AUD would be closest to:

Akihiko Takabe has designed a sophisticated forecasting model, which predicts the movements in the overall stock market, in the hope of earning a return in excess of a fair return for the risk involved. He uses the predictions of the model to decide whether to buy, hold, or sell the shares of an index fund that aims to replicate the movements of the stock market. Takabe would best be characterized as a(n):

James Beach is young and has substantial wealth. A significant proportion of his stock portfolio consists of emerging market stocks that offer relatively high expected returns at the cost of relatively high risk. Beach believes that investment in emerging market stocks is appropriate for him given his ability and willingness to take risk. Which of the following labels most appropriately describes Beach?

Lisa Smith owns a manufacturing company in the United States. Her company has sold goods to a customer in Brazil and will be paid in Brazilian real (BRL) in three months. Smith is concerned about the possibility of the BRL depreciating more than expected against the US dollar (USD). Therefore, she is planning to sell three-month futures contracts on the BRL. The seller of such contracts gener- ally gains when the BRL depreciates against the USD. If Smith were to sell these future contracts , she would most appropriately be described as a(n):

Which of the following is not a function of the financial system?

An investor primarily invests in stocks of publicly traded companies. The investor wants to increase the diversification of his portfolio. A friend has recommended investing in real estate properties. The purchase of real estate would best be char- acterized as a transaction in the:

A hedge fund holds its excess cash in 90-day commercial paper and negotiable certificates of deposit. The cash management policy of the hedge fund is best described as using:

An oil and gas exploration and production company announces that it is offering 30 million shares to the public at $45.50 each. This transaction is most likely a sale in the:

Consider a mutual fund that invests primarily in fixed-income securities that have been determined to be appropriate given the fund’s investment goal. Which of the following is least likely to be a part of this fund?

A friend has asked you to explain the differences between open-end and closed-end funds. Which of the following will you most likely include in your explanation?

The Standard & Poor ’s Depositar y Receipts (SPDRs) is an investment that tracks the S&P 500 stock market index. Purchases and sales of SPDRs during an average trading day are best described as:

Which of the following statements about exchange-traded funds is most correct?

The usefulness of a for ward contract is limited by some problems. Which of the following is most likely one of those problems?

Tony Harris is planning to start trading in commodities. He has heard about the use of futures contracts on commodities and is learning more about them. Which of the following is Harris least likely to find associated with a futures contract?

A German company that exports machinery is expecting to receive $10 million in three months. The firm converts all its foreign currenc y receipts into euros. The chief financial officer of the company wishes to lock in a minimum fixed rate for converting the $10 million to euro but also wants to keep the flexibility to use the future spot rate if it is favorable. What hedging transaction is most likely to achieve this objective?

A book publisher requires substantial quantities of paper. The publisher and a paper producer have entered into an agreement for the publisher to buy and the producer to supply a given quantity of paper four months later at a price agreed upon today. This agreement is a:

The Standard & Poor ’s Depositar y Receipts (SPDRs) is an exchange-traded fund in the United States that is designed to track the S&P 500 stock market index. The latest price of a share of SPDRs is $290. A trader has just bought call options on shares of SPDRs for a premium of $3 per share. The call options expire in six months and have an exercise price of $305 per share. On the expiration date, the trader will exercise the call options (ignore any transaction costs) if and only if the shares of SPDRs are trading:

Jason Schmidt works for a hedge fund and he specializes in finding profit oppor- tunities that are the result of inefficiencies in the market for convertible bonds— bonds that can be converted into a predetermined amount of a company ’s common stock. Schmidt tries to find convertibles that are priced inefficiently relative to the underlying stock. The trading strategy involves the simultaneous purchase of the convertible bond and the short sale of the underlying common stock. The above process could best be described as:

Pierre-Louis Robert just purchased a call option on shares of the Michelin Group. A few days ago he wrote a put option on Michelin shares. The call and put options have the same exercise price, expiration date, and number of shares underlying. Considering both positions , Robert’s exposure to the risk of the stock of the Michelin Group is:

An online brokerage firm has set the minimum margin requirement at 55 percent. What is the maximum leverage ratio associated with a position financed by this minimum margin requirement?

A trader has purchased 200 shares of a non-dividend-paying firm on margin at a price of $50 per share. The leverage ratio is 2.5. Six months later, the trader sells these shares at $60 per share. Ignoring the interest paid on the borrowed amount and the transaction costs , what was the return to the trader during the six-month period?

Jason Williams purchased 500 shares of a company at $32 per share. The stock was bought on 75 percent margin. One month later, Williams had to pay interest on the amount borrowed at a rate of 2 percent per month. At that time, Williams received a dividend of $0.50 per share. Immediately after that he sold the shares at $28 per share. He paid commissions of $10 on the purchase and $10 on the sale of the stock. What was the rate of return on this investment for the one-month period?

Caroline Rogers believes the price of Gamma Corp. stock will go down in the near future. She has decided to sell short 200 shares of Gamma Corp. at the current market price of €47. The initial margin requirement is 40 percent. Which of the following is an appropriate statement regarding the margin requirement that Rogers is subject to on this short sale?

The current price of a stock is $25 per share. You have $10,000 to invest. You borrow an additional $10,000 from your broker and invest $20,000 in the stock. If the maintenance margin is 30 percent, at what price will a margin call first occur?

What is the market?

A new buy limit order is placed for 300 shares at ¥123.40. This limit order is said to:

Currently, the market in a stock is “$54.62 bid, offered at $54.71.” A new sell limit order is placed at $54.62. This limit order is said to:

You have placed a sell market-on-open order—a market order that would au- tomatically be submitted at the market’s open tomorrow and would fill at the market price. Your instruction, to sell the shares at the market open, is a(n):

Jim White has sold short 100 shares of Super Stores at a price of $42 per share. He has also simultaneously placed a “good-till-cancelled, stop 50, limit 55 buy ” order. Assume that if the stop condition specified by White is satisfied and the order becomes valid, it will get executed. Excluding transaction costs , what is the maximum possible loss that White can have?

You own shares of a company that are currently trading at $30 a share. Your technical analysis of the shares indicates a support level of $27.50. That is , if the price of the shares is going down, it is more likely to stay above this level rather than fall below it. If the price does fall below this level, however, you believe that the price may continue to decline. You have no immediate intent to sell the shares but are concerned about the possibility of a huge loss if the share price declines below the support level. Which of the following types of orders could you place to most appropriately address your concern?

In an under written offering , the risk that the entire issue may not be sold to the public at the stipulated offering price is borne by the:

A British company listed on AIM (formerly the Alternative Investment Market) of the London Stock Exchange announced the sale of 6,686,665 shares to a small group of qualified investors at £0.025 per share. Which of the following best describes this sale?

A German publicly traded company, to raise new capital, gave its existing shareholders the opportunity to subscribe for new shares. The existing shareholders could purchase two new shares at a subscription price of €4.58 per share for ever y 15 shares held. This is an example of a(n):

Consider an order-driven system that allows hidden orders. The following four sell orders on a particular stock are currently in the system’s limit order book. Based on the commonly used order precedence hierarchy, which of these orders will have precedence over others?

Zhenhu Li has submitted an immediate-or-cancel buy order for 500 shares of a company at a limit price of CNY 74.25. There are two sell limit orders standing in that stock’s order book at that time. One is for 300 shares at a limit price of CNY 74.30 and the other is for 400 shares at a limit price of CNY 74.35. How many shares in Li’s order would get cancelled?

Ian submits a day order to sell 1,000 shares , limit £19.83. Assuming that no more buy orders are submitted on that day after Ian submits his order, what would be Ian’s average trade price?

A financial analyst is examining whether a country ’s financial market is well functioning. She finds that the transaction costs in this market are low and trading volumes are high. She concludes that the market is quite liquid. In such a market :

The government of a countr y whose financial markets are in an early stage of development has hired you as a consultant on financial market regulation. Your first task is to prepare a list of the objectives of market regulation. Which of the following is least likely to be included in this list of objectives?

A security market index represents the:

One month after inception, the price return version and total return version of a single index (consisting of identical securities and weights) will be equal if :

The values of a price return index and a total return index consisting of identical equal-weighted dividend-paying equities will be equal:

Security market indexes are:

When creating a security market index, an index provider must first determine the:

The price return of the index is:

The total return of the index is:

The price return of the index is:

The price return of the index is:

The total return of the index is:

When creating a security market index, the target market :

The price return of the index over the period is:

The return on the value-weighted index over the period is:

The return on the index over the period is:

Which of the following index weighting methods requires an adjustment to the divisor after a stock split?

If the price return of an equal-weighted index exceeds that of a market-capitalization-weighted index comprised of the same securities , the most likely explanation is:

A float-adjusted market-capitalization-weighted index weights each of its constituent securities by its price and:

Which of the following index weighting methods is most likely subject to a value tilt?

Rebalancing an index is the process of periodically adjusting the constituent :

Which of the following index weighting methods requires the most frequent rebalancing?

Reconstitution of a security market index reduces:

Security market indexes are used as:

Uses of market indexes do not include serving as a:

Which of the following statements regarding sector indexes is most accurate? Sector indexes:

Which of the following is an example of a style index? An index based on:

Which of the following statements regarding fixed-income indexes is most accurate?

An aggregate fixed-income index :

Fixed-income indexes are least likely constructed on the basis of :

In comparison to equity indexes , the constituent securities of fixed-income indexes are:

Commodity index values are based on:

Which of the following statements is most accurate?

Which of the following is not a real estate index category?

A unique feature of hedge fund indexes is that they :

The returns of hedge fund indexes are most likely:

If markets are efficient, the difference between the intrinsic value and market value of a company ’s security is:

The intrinsic value of an under valued asset is:

The market value of an under valued asset is:

In an efficient market, the change in a company ’s share price is most likely the result of :

Regulation that restricts some investors from participating in a market will most likely:

With respect to efficient market theory, when a market allows short selling , the efficiency of the market is most likely to:

Which of the following regulations will most likely contribute to market efficiency? Regulatory restrictions on:

Which of the following market regulations will most likely impede market efficiency?

An increase in the time between when an order to trade a security is placed and when the order is executed most likely indicates that market efficiency has:

With respect to the efficient market hypothesis , if security prices reflect only past prices and trading volume information, then the market is:

Which one of the following statements best describes the semi-strong form of market efficiency?

If prices reflect all public and private information, the market is best described as:

If markets are semi-strong efficient, standard fundamental analysis will yield abnormal trading profits that are:

If markets are semi-strong-form efficient, then passive portfolio management strategies are most likely to:

If a market is semi-strong-form efficient, the risk-adjusted returns of a passively managed portfolio relative to an actively managed portfolio are most likely:

Technical analysts assume that markets are:

Fundamental analysts assume that markets are:

If a market is weak-form efficient but semi-strong-form inefficient, then which of the following types of portfolio management is most likely to produce abnormal returns?

Which of the following is least likely to explain the January effect anomaly?

If a researcher conducting empirical tests of a trading strategy using time series of returns finds statistically significant abnormal returns , then the researcher has most likely found:

Researchers have found that value stocks have consistently outperformed growth stocks. An investor wishing to exploit the value effect should purchase the stock of companies with above-average:

Which of the following market anomalies is inconsistent with weak-form market efficiency?

With respect to efficient markets , a company whose share price changes gradually after the public release of its annual report most likely indicates that the market where the company trades is:

With respect to rational and irrational investment decisions , the efficient market hypothesis requires:

Obser ved overreactions in markets can be explained by an investor ’s degree of :

Like traditional finance models , the behavioral theory of loss aversion assumes that investors dislike risk; however, the dislike of risk in behavioral theory is assumed to be:

Which of the following is not a characteristic of common equity?

The type of equity voting right that grants one vote for each share of equity owned is referred to as:

All of the following are characteristics of preference shares except:

Participating preference shares entitle shareholders to:

Which of the following statements about private equity securities is incorrect?

Venture capital investments:

Which of the following statements most accurately describes one difference between private and public equity firms?

Emerging markets have benefited from recent trends in international markets. Which of the following has not been a benefit of these trends?

When investing in unsponsored depository receipts , the voting rights to the shares in the trust belong to:

With respect to Level III sponsored ADRs , which of the following is least likely to be accurate? They :

A basket of listed depositor y receipts , or an exchange-traded fund, would most likely be used for:

Calculate the total return on a share of equity using the following data: Purchase price: $50 Sale price: $42 Dividend paid during holding period: $2

If a US -based investor purchases a euro-denominated ETF and the euro subsequently depreciates in value relative to the dollar, the investor will have a total return that is:

Which of the following is incorrect about the risk of an equity security? The risk of an equity security is:

From an investor ’s point of view, which of the following equity securities is the least risky?

Which of the following is least likely to be a reason for a company to issue equity securities on the primary market?

Which of the following is not a primary goal of raising equity capital?

Which of the following statements is most accurate in describing a company ’s book value?

Calculate the book value of a company

Which of the following statements is least accurate in describing a company ’s market value?

Calculate the return on equity (ROE) of a stable company

Holding all other factors constant, which of the following situations will most likely lead to an increase in a company ’s return on equity?

Which of the following measures is the most difficult to estimate?

A company ’s cost of equity is often used as a proxy for investors’:

Which of the following is most likely to be an element of Hu’s subsequent reports?

Shipping is a highly cyclical industry. Which of the following companies most likely has the most ability to ramp up capacity to meet increased demand for shipping services?

In 2X19, NewShips’ revenue was closest to:

When conducting company analysis , which of the following is least relevant to determining a company ’s business model?

OldShips’ cash conversion c ycle (CCC) is:

The first step in reviewing a company ’s capital investments is to:

An alternative method of grouping companies by geography is least likely to be completed using:

A market consists of three firms with market shares of 50%, 30%, and 20%. The Herfindahl-Hirschman Index (HHI) is closest to:

Lower industry concentration is usually associated with a high degree of competitive intensity unless the industry is most likely:

Increased environmental regulations on automotive manufacturers will most likely have which of the following effects on the threat of new entrants?

The CEO of a large law firm is concerned about a new mobile application that uses algorithms to auto-complete legal forms and questions in discovery and provides recommendations for small-claims matters at a much lower cost than a traditional law firm charges. As a result, the CEO is contemplating whether the firm should develop and launch its own branded application, which would affect its short-term profitability but maintain its existing customer base, or give up market share to focus on more complex claims with higher profitability. This scenario is an example of :

PESTLE analysis is a framework for identif ying:

The means of executing cost leadership competitive strategies do not include which of the following?

Which of the following is most likely a risk of executing a differentiation competitive strategy?

Forecast objects should be:

Management guidance is most appropriately used by analysts in forecasting:

Which of the following is an example of a top-down driver of revenues for a passenger airline?

An analyst forecasts a company ’s sales using a historical results approach and top-down drivers (expected industry sales and expected market share). The analyst observes that the forecast is within the range of management guidance on sales but is toward the upper end and not closer to the midpoint. Which of the following is the most likely explanation for this observation?

A clothing company, which initially produced designer clothing , has increasingly entered into the mass market. Which of the following approaches to forecasting revenues is least appropriate?

An analyst is forecasting operating costs for a company with relatively high fixed costs, sensitivity to economic conditions, and commodity inputs with volatile pricing. The company does not follow a hedging strategy for commodity purchases but tries to buy when prices are low. Which of the following is most appropriate to use in forecasting operating costs? The analyst uses:

An analyst notes that a company ’s capital expenditures do not follow a discernible pattern; the company seems to have periods of very low capital expenditures and periods of high capital expenditures. Management does not provide any guidance on capital expenditures. The analyst should develop a forecast of capital expenditures based on:

An analyst predicts that if a company ’s technological developments are a success , the company ’s operating costs will be reduced by 15%. As a result of the reduction in costs , the company will reduce the average selling price of its products by 5% and the volume of sales will increase by 8%. The company ’s current gross profit margin is 40%. If technological developments occur, the company ’s gross profit margin will be closest to:

An analyst estimates the intrinsic value of a stock to be in the range of €17.85 to €21.45. The current market price of the stock is €24.35. This stock is most likely:

An analyst determines the intrinsic value of an equity security to be equal to $55. If the current price is $47, the equity is most likely:

In asset-based valuation models , the intrinsic value of a common share of stock is based on the:

Which of the following is most likely used in a present value model?

Book value is least likely to be considered when using:

An analyst is attempting to calculate the intrinsic value of a company and has gathered the following company data: EBITDA , total market value, and market value of cash and short-term investments , liabilities , and preferred shares. The analyst is least likely to use:

An analyst who bases the calculation of intrinsic value on dividend-paying capacity rather than expected dividends will most likely use the:

An investor expects to purchase shares of common stock today and sell them after two years. The investor has estimated dividends for the next two years , D₁ and D₂, and the selling price of the stock two years from now, P₂. According to the dividend discount model, the intrinsic value of the stock today is the present value of :

In the free cash flow to equity (FCFE) model, the intrinsic value of a share of stock is calculated as:

With respect to present value models , which of the following statements is most accurate?

A Canadian life insurance company has an issue of 4.80 percent, $25 par value, perpetual, non-convertible, non-callable preferred shares outstanding. The required rate of return on similar issues is 4.49 percent. The intrinsic value of a preferred share is closest to:

Two analysts estimating the value of a non-convertible, non-callable, perpetual preferred stock with a constant dividend arrive at different estimated values. The most likely reason for the difference is that the analysts used different :

The Beasley Corporation has just paid a dividend of $1.75 per share. If the required rate of return is 12.3 percent per year and dividends are expected to grow indefinitely at a constant rate of 9.2 percent per year, the intrinsic value of Beasley Corporation stock is closest to:

An investor is considering the purchase of a common stock with a $2.00 annual dividend. The dividend is expected to grow at a rate of 4 percent annually. If the investor ’s required rate of return is 7 percent, the intrinsic value of the stock is closest to:

The Gordon growth model can be used to value dividend-paying companies that are:

Which of the following is most likely considered a weakness of present value models?

Based on a dividend discount model, the stock is most likely:

An analyst is attempting to value shares of the Dominion Company. The company has just paid a dividend of $0.58 per share. Dividends are expected to grow by 20 percent next year and 15 percent the year after that. From the third year onward, dividends are expected to grow at 5.6 percent per year indefinitely. If the required rate of return is 8.3 percent, the intrinsic value of the stock is closest to:

Hideki Corporation has just paid a dividend of ¥450 per share. Annual dividends are expected to grow at the rate of 4 percent per year over the next four years. At the end of four years , shares of Hideki Corporation are expected to sell for ¥9000. If the required rate of return is 12 percent, the intrinsic value of a share of Hideki Corporation is closest to:

The best model to use when valuing a young dividend-paying company that is just entering the growth phase is most likely the:

An equity analyst has been asked to estimate the intrinsic value of the common stock of Omega Corporation, a leading manufacturer of automobile seats. Omega is in a mature industr y, and both its earnings and dividends are expected to grow at a rate of 3 percent annually. Which of the following is most likely to be the best model for determining the intrinsic value of an Omega share?

A price earnings ratio that is derived from the Gordon growth model is inversely related to the:

The primar y difference between P/E multiples based on comparables and P/E multiples based on fundamentals is that fundamentals-based P/Es take into account :

An analyst makes the following statement : “Use of P/E and other multiples for analysis is not effective because the multiples are based on historical data and because not all companies have positive accounting earnings.” The analyst’s statement is most likely:

An analyst has gathered the following information for the Oudin Corporation: </br> &emsp;Expected earnings per share = €5.70 </br> &emsp;Expected dividends per share = €2.70 </br> &emsp;Dividends are expected to grow at 2.75 percent per year indefinitely </br> &emsp;The required rate of return is 8.35 percent </br>Based on the information provided, the price/earnings multiple for Oudin is closest to:

An analyst has prepared a table of the average trailing twelve-month price-to-earning (P/E), price-to-cash flow (P/CF), and price-to-sales (P/S) for the Tanaka Corporation for the years 2014 to 2017.</br> <table style="width:90%;text-align:center"> <tr> <th>Year</th> <th>P/E</th> <th>P/CF</th> <th>P/S</th> </tr> <tr> <td>2014</td> <td>4.9</td> <td>5.4</td> <td>1.2</td> </tr><tr> <td>2015</td> <td>6.1</td> <td>8.6</td> <td>1.5</td> </tr><tr> <td>2016</td> <td>8.3</td> <td>7.3</td> <td>1.9</td> </tr> <tr> <td>2017</td> <td>9.2</td> <td>7.9</td> <td>2.3</td> </tr> </table></br> As of the date of the valuation in 2018, the trailing twelve-month P/E , P/CF, and P/S are, respectively, 9.2, 8.0, and 2.5. Based on the information provided, the analyst may reasonably conclude that Tanaka shares are most likely:

An analyst gathers the following information about two companies: </br><table style="width:90%;text-align:center"> <tr> <th></th> <th>Alpha Corp.</th> <th>Delta Co.</th> </tr> <tr> <td class="left">Current price per share</td> <td>$57.32</td> <td>$18.93</td> </tr> <tr> <td class="left">Last year’s EPS</td> <td>$3.82</td> <td>$1.35</td> </tr> <tr> <td class="left">Current year’s estimated EPS</td> <td>$4.75</td> <td>$1.40</td> </tr> </table></br>Which of the following statements is most accurate?

An analyst gathers the following information about similar companies in the banking sector:</br> <table style="width:90%;text-align:center"> <tr> <th></th> <th>First Bank</th> <th>Prime Bank</th> <th>Pioneer Trust</th> </tr> <tr> <td class="left">P/B</td> <td>1.10</td> <td>0.60</td> <td>0.60</td> </tr> <tr> <td class="left">P/E</td> <td>8.40</td> <td>11.10</td> <td>8.30</td> </tr> </table></br> Which of the companies is most likely to be under valued?

The market value of equity for a company can be calculated as enterprise value:

Which of the following statements regarding the calculation of the enterprise value multiple is most likely correct?

An analyst has determined that the appropriate EV/EBITDA for Rainbow Company is 10.2. The analyst has also collected the following forecasted information for Rainbow Company : </br> &emsp;EBITDA = $22,000,000 </br> &emsp;Market value of debt = $56,000,000 </br> &emsp;Cash = $1,500,000 </br>The value of equity for Rainbow Company is closest to:

Enterprise value is most often determined as market capitalization of common equity and preferred stock minus the value of cash equivalents plus the:

A disadvantage of the EV method for valuing equity is that the following information may be difficult to obtain:

Asset-based valuation models are best suited to companies where the capital structure does not have a high proportion of :

Which of the following is most likely a reason for using asset-based valuation?

Which type of equity valuation model is most likely to be preferable when one is comparing similar companies?

Benchmarks for minimally acceptable behaviors of community members are:

Specialized knowledge and skills , a commitment to serve others , and a shared code of ethics best characterize a(n):

When unethical behavior erodes trust in an investment firm, that firm is more likely to experience:

High ethical standards are distinguishing features of which of the following bodies?

Fiduciary duty is a standard most likely to be upheld by members of a(n):

Which of the following best identifies an internal trait that may lead to poor ethical decision making?

Situational influences in decision making will most likely be minimized if :

Decision makers who use a compliance approach are most likely to:

To maintain trust, the investment management profession must be interdependent with:

Which is an example of an activity that may be legal but that CFA Institute considers unethical?

An ethical decision-making framework will most likely:

When an ethical dilemma occurs , an investment professional should most likely first raise the issue with a:

Which of the following statements best describes an aspect of the Professional Conduct Program process?

A current Code of Ethics principle reads in full, “Promote the integrity :

Which of the following is correct with regard to the Standards of Professional Conduct?

Which of the following statements best describes an aspect of the Standards of Professional Conduct? Members and candidates are required to:

A CFA Institute member or candidate violates Standard II(A) Material Nonpublic Information by :

Standard III(C) Suitability requires members and candidates in an advisory relationship with a client to:

Standard III: Duties to Clients states that members and candidates must :

Standard IV: Duties to Employers states that members and candidates must not :

Standard V: Investment Analysis , Recommendations , and Actions states that members and candidates must :

Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate explicitly states a requirement regarding:

Smith, a research analyst with a brokerage firm, decides to change his recommendation for the common stock of Green Company, Inc., from a “buy ” to a “sell.” He mails this change in investment advice to all the firm’s clients on Wednesday. The day after the mailing , a client calls with a buy order for 500 shares of Green Company. In this circumstance, Smith should:

Which statement about a manager ’s use of client brokerage commissions violates the Code and Standards?

Jamison is a junior research analyst with Howard & Howard, a brokerage and investment banking firm. Howard & Howard’s mergers and acquisitions department has represented the Britland Company in all of its acquisitions for the past 20 years. Two of Howard & Howard’s senior officers are directors of various Britland subsidiaries. Jamison has been asked to write a research report on Britland. What is the best course of action for her to follow?

Which of the following statements clearly conflicts with the recommended procedures for compliance presented in the CFA Institute Standards of Practice Handbook?

Bronson provides investment advice to the board of trustees of a private university endowment fund. The trustees have provided Bronson with the fund’s financial information, including planned expenditures. Bronson receives a phone call on Friday afternoon from Murdock , a prominent alumnus , requesting that Bronson fax him comprehensive financial information about the fund. According to Murdock , he has a potential contributor but needs the information that day to close the deal and cannot contact any of the trustees. Based on the CFA Institute Standards , Bronson should:

Willier is the research analyst responsible for following Company X. All the information he has accumulated and documented suggests that the outlook for the company ’s new products is poor, so the stock should be rated a weak “hold.” During lunch, however, Willier overhears a financial analyst from another firm whom he respects offer opinions that conflict with Willier ’s forecasts and expectations. Upon returning to his office, Willier releases a strong “buy ” recommendation to the public. Willier:

An investment management firm has been hired by ETV Corporation to work on an additional public offering for the company. The firm’s brokerage unit now has a “sell” recommendation on ETV, but the head of the investment banking department has asked the head of the brokerage unit to change the recommendation from “sell” to “buy.” According to the Standards , the head of the brokerage unit would be permitted to:

Albert and Tye, who recently started their own investment advisory business , have registered to take the Level III CFA exam. Albert’s business card reads , “Judy Albert, CFA Level II.” Tye has not put anything about the CFA designation on his business card, but promotional material that he designed for the business describes the CFA requirements and indicates that Tye participates in the CFA Program and has completed Levels I and II. According to the Standards:

Scott works for a regional brokerage firm. He estimates that Walkton Industries will increase its dividend by US$1.50 a share during the next year. He realizes that this increase is contingent on pending legislation that would, if enacted, give Walkton a substantial tax break. The US representative for Walkton’s home district has told Scott that, although she is lobbying hard for the bill and prospects for its passage are favorable, concern of the US Congress over the federal deficit could cause the tax bill to be voted down. Walkton Industries has not made any statements about a change in dividend policy. Scott writes in his research report, “ We expect Walkton’s stock price to rise by at least US$8.00 a share by the end of the year because the dividend will increase by US$1.50 a share. Investors buying the stock at the current time should expect to realize a total return of at least 15% on the stock.” According to the Standards:

Which one of the following actions will help ensure the fair treatment of brokerage firm clients when a new investment recommendation is made?

The mosaic theory holds that an analyst :

Jurgen is a portfolio manager. One of her firm’s clients has told Jurgen that he will compensate her beyond the compensation provided by her firm on the basis of the capital appreciation of his portfolio each year. Jurgen should:

One of the discretionary accounts managed by Farnsworth is the Jones Corporation employee profit-sharing plan. Jones , the company president, recently asked Farnsworth to vote the shares in the profit-sharing plan in favor of the slate of directors nominated by Jones Corporation and against the directors sponsored by a dissident stockholder group. Farnsworth does not want to lose this account, because he directs all the account’s trades to a brokerage firm that provides Farnsworth with useful information about tax-free investments. Although this information is not of value in managing the Jones Corporation account, it does help in managing several other accounts. The brokerage firm providing this information also offers the lowest commissions for trades and provides best execution. Farnsworth investigates the director issue, concludes that the management-nominated slate is better for the long-run performance of the company than the dissident group’s slate, and votes accordingly. Farnsworth:

Brown works for an investment counseling firm. Green, a new client of the firm, is meeting with Brown for the first time. Green used another counseling firm for financial advice for years , but she has switched her account to Brown’s firm. After spending a few minutes getting acquainted, Brown explains to Green that she has discovered a highly under valued stock that offers large potential gains. She recommends that Green purchase the stock. Brown has committed a violation of the Standards. What should she have done differently?

Grey recommends the purchase of a mutual fund that invests solely in long-term US Treasury bonds. He makes the following statements to his clients: I. “The payment of the bonds is guaranteed by the US government ; therefore, the default risk of the bonds is virtually zero.” II. “If you invest in the mutual fund, you will earn a 10% rate of return each year for the next several years based on historical performance of the market.” Did Grey ’s statements violate the CFA Institute Code and Standards?

Anderb, a portfolio manager for XYZ Investment Management Company—a registered investment organization that advises investment firms and private accounts—was promoted to that position three years ago. Bates , her supervisor, is responsible for reviewing Anderb’s portfolio account transactions and her required monthly reports of personal stock transactions. Anderb has been using Jonelli, a broker, almost exclusively for brokerage transactions for the portfolio account. For securities in which Jonelli’s firm makes a market, Jonelli has been giving Anderb lower prices for personal purchases and higher prices for personal sales than Jonelli gives to Anderb’s portfolio accounts and other investors. Anderb has been filing monthly reports with Bates only for those months in which she has no personal transactions , which is about every fourth month. Which of the following is most likely to be a violation of the Code and Standards?

Which of the following is a correct statement of a member ’s or candidate’s duty under the Code and Standards?

Ward is scheduled to visit the corporate headquarters of Evans Industries. Ward expects to use the information he obtains there to complete his research report on Evans stock. Ward learns that Evans plans to pay all of Ward’s expenses for the trip, including the costs of meals , his hotel room, and air transportation. Which of the following actions would be the best course for Ward to take under the Code and Standards?

Which of the following statements is correct under the Code and Standards?

Smith is a financial analyst with XYZ Brokerage Firm. She is preparing a purchase recommendation on JNI Corporation. Which of the following situations is most likely to represent a conflict of interest for Smith that would have to be avoided or disclosed?

Michelieu tells a prospective client, “I may not have a long-term track record yet, but I’m sure that you’ll be very pleased with my recommendations and service. In the three years that I’ve been in the business , my equity-oriented clients have averaged a total return of more than 26% a year.” The statement is true, but Michelieu only has a few clients , and one of his clients took a large position in a penny stock (against Michelieu’s advice) and realized a huge gain. This large return caused the average of all of Michelieu’s clients to exceed 26% a year. Without this one investment, the average gain would have been 8% a year. Has Michelieu violated the Standards?

An investment banking department of a brokerage firm often receives material nonpublic information that could have considerable value if used in advising the firm’s brokerage clients. In order to conform to the Code and Standards , which one of the following is the best policy for the brokerage firm?

Stewart has been hired by Goodner Industries , Inc., to manage its pension fund. Stewart’s duty of loyalty, prudence, and care is owed to:

Which of the following statements is a stated purpose of disclosure in Standard VI(C) Referral Fees?

Rose, a portfolio manager for a local investment advisory firm, is planning to sell a portion of his personal investment portfolio to cover the costs of his child’s academic tuition. Rose wants to sell a portion of his holdings in Household Products , but his firm recently upgraded the stock to “strong buy.” Which of the following describes Rose’s options under the Code and Standards?

A former hedge fund manager, Jackman, has decided to launch a new private wealth management firm. From his prior experiences , he believes the new firm needs to achieve US$1 million in assets under management in the first year. Jackman offers a US$10,000 incentive to any adviser who joins his firm with the minimum of US$200,000 in committed investments. Jackman places notice of the opening on several industr y web portals and career search sites. Which of the following is correct according to the Code and Standards?

Carter works for Invest Today, a local asset management firm. A broker that provides Carter with proprietary research through client brokerage arrangements is offering a new trading ser vice. The broker is offering low-fee, execution-only trades to complement its traditional full-service execution-and-research trades. To entice Carter and other asset managers to send additional business its way, the broker will apply the commissions paid on the new ser vice toward satisfying the brokerage commitment of the prior full-service arrangements. Carter has always been satisfied with the execution provided on the full-service trades , and the fees of the new low-fee trades are comparable to those of other brokers currently used for the accounts that prohibit soft dollar arrangements.

Rule has worked as a portfolio manager for a large investment management firm for the past 10 years. Rule earned his CFA charter last year and has decided to open his own investment management firm. After leaving his current employer, Rule creates some marketing material for his new firm. He states in the material, “In earning the CFA charter, a highly regarded credential in the investment management industry, I further enhanced the portfolio management skills learned during my professional career. While completing the examination process in three consecutive years , I consistently received the highest possible scores on the topics of Ethics , Alternative Investments , and Portfolio Management.” Has Rule violated Standard VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program in his marketing material?

Stafford is a portfolio manager for a specialized real estate mutual fund. Her firm clearly describes in the fund’s prospectus its soft dollar policies. Stafford decides that entering the CFA Program will enhance her investment decision-making skill and decides to use the fund’s soft dollar account to pay the registration and exam fees for the CFA Program. Which of the following statements is most likely correct?

Long has been asked to be the keynote speaker at an upcoming investment conference. The event is being hosted by one of the third-party investment managers currently used by his pension fund. The manager offers to cover all conference and travel costs for Long and make the conference registrations free for three additional members of his investment management team. To ensure that the conference obtains the best speakers , the host firm has arranged for an exclusive golf outing for the day following the conference on a local championship-caliber course. Which of the following is least likely to violate Standard I(B)?

Andrews , a private wealth manager, is conducting inter views for a new research analyst for his firm. One of the candidates is Wright, an analyst with a local investment bank. During the inter view, while Wright is describing his analytical skills , he mentions a current merger in which his firm is acting as the adviser. Andrews has heard rumors of a possible merger between the two companies , but no releases have been made by the companies concerned. Which of the following actions by Andrews is least likely a violation of the Code and Standards?

Pietro, president of Local Bank , has hired the bank’s market maker, Vogt, to seek a merger partner. Local is currently listed on a stock exchange and has not reported that it is seeking strategic alternatives. Vogt has discussed the possibility of a merger with several firms , but they have all decided to wait until after the next period’s financial data are available. The potential buyers believe the results will be worse than the results of prior periods and will allow them to pay less for Local Bank. Pietro wants to increase the likelihood of structuring a merger deal quickly. Which of the following actions would most likely be a violation of the Code and Standards?

ABC Investment Management acquires a new, very large account with two concentrated positions. The firm’s current policy is to add new accounts for the purpose of performance calculation after the first full month of management. Cupp is responsible for calculating the firm’s performance returns. Before the end of the initial month, Cupp notices that one of the significant holdings of the new accounts is acquired by another company, causing the value of the investment to double. Because of this holding , Cupp decides to account for the new portfolio as of the date of transfer, thereby allowing ABC Investment to reap the positive impact of that month’s portfolio return. Which of the following statements is true?

Cannan has been working from home on weekends and occasionally saves correspondence with clients and completed reports on her home computer. Because of worsening market conditions , Cannan is one of several employees released by her firm. While Cannan is looking for a new job, she uses the files she saved at home to request letters of recommendation from former clients. She also provides to prospective clients some of the reports as examples of her abilities. Which of the following statements is true?

Quinn sat for the Level III CFA exam this past weekend. He updates his re- sume with the following statement : “In finishing the CFA Program, I improved my skills related to researching investments and managing portfolios. I will be eligible for the CFA charter upon completion of the required work experience.” Which of the following statements is true?

During a round of golf, Rodriguez , chief financial officer of Mega Retail, mentions to Hart, a local investment adviser and long-time personal friend, that Mega is having an exceptional sales quarter. Rodriguez expects the results to be almost 10% above the current estimates. The next day, Hart initiates the purchase of a large stake in the local exchange-traded retail fund for her personal account.

Park is very frustrated after taking the Level II CFA exam. While she was studying for the exam, to supplement the curriculum provided, she ordered and used study material from a third-party provider. Park believes the additional material focused her attention on specific topic areas that were not tested while ignoring other areas. She posts the following statement on the provider ’s discussion board: “I am very dissatisfied with your firm’s CFA Program Level II material. I found the exam extremely difficult and myself unprepared for specific questions after using your product. How could your ser vice provide such limited instructional resources on the analysis of inventories and taxes when the exam had multiple questions about them? I will not recommend your products to other candidates.” Which of the following statements is true?

Paper was recently terminated as one of a team of five managers of an equity fund. The fund had two value-focused managers and terminated one of them to reduce costs. In a letter sent to prospective employers , Paper presents , with written permission of the firm, the performance history of the fund to demonstrate his past success. Which of the following statements is true?

Townsend was recently appointed to the board of directors of a youth golf program that is the local chapter of a national not-for-profit organization. The program is beginning a new fund-raising campaign to expand the number of annual scholarships it provides. Townsend believes many of her clients make annual donations to charity. The next week in her regular newsletter to all clients , she includes a small section discussing the fund-raising campaign and her position on the organization’s board. Which of the following statements is true?

A firm that does not adopt the GIPS standards could mischaracterize its overall performance by presenting a performance history :

Which of the following statements regarding GIPS compliance is correct?

Each composite of a GIPS -compliant firm must consist of :

Verification:

Which of the following cannot claim compliance with the GIPS standards?

Which of the following is an abusive practice that the GIPS standards were designed to avoid?

The process of testing a firm or asset owner that claims compliance with the GIPS standards is referred to as a:

Firms that claim compliance with the GIPS standards are required to receive a verification:

Which of the following is not a commonly perceived benefit of the GIPS standards?

When defining the firm, the GIPS standards recommend that firms should:

A composite return reflects the performance of :

Which of the following statements best describes why Montau AG should consider a derivative rather than a spot market transaction to manage the financial risk of this commercial contract?

Which of the following types of derivative and underlyings are best suited to hedge Montau’s financial risk under the commercial transaction?

Identify A , B, and C in the correct order in the following diagram, as in Exhib it 1, for the derivative to hedge Montau's financial risk under the commercial transaction. <img src="/assets/images/Derivative1.png"/>

Which of the following statements about the most appropriate derivative market to hedge Montau AG’s financial risk under the commercial contract is most accurate?

If Montau enters into a centrally cleared derivative contract on the OTC market, which of the following statements about credit risk associated with the derivative is most likely correct?

Kleinert’s analyst estimates a 50-50 chance that the price of SparCoin will either increase by 12% or decline by 10% at the put option’s expiration date. Which of the following statements best describes the no-arbitrage option price implied by this assumption?

If Kleinert’s clients obser ve that the one-year put option with a €100 exercise price is trading at €2.50, which of the following statements best describes how Kleinert’s clients could take advantage of this to earn a risk-free return greater than 0.37% over the year.

If risk-free investments yielded a higher return over the next year, which of the following statements best describes how this would affect the no-arbitrage value of the put option on SparCoin shares?

If the expected percentage increase and decrease in SparCoin’s share price were to double, which of the following is the closest estimate of the one-year put op tion price with an exercise price of €100?

Which of the following derivative contracts available to VFO’s chief investment officer is best suited to reduce exposure to a decline in Biomian’s stock price in the next six months?

VFO’s market strategist believes that Biomian’s share price will rise over the next six months but would like to protect against a decline in Biomian’s share price over the period. Which of the following positions is best suited for VFO to man age its existing Biomian exposure based on this view?

Assume that Biomian shares rise over the next six months. Which of the following statements about VFO’s derivative strategies under this scenario is most accurate?

VFO’s market strategist is considering a six-month call option strategy on the NIFTY 50 benchmark Indian stock market index to increase broad market equity exposure. The NIFTY 50 price today is INR15,200, and the strategist obser ves that a call option with a INR16,000 exercise price (X) is trading at a premium of INR1,500. Which of the following represents the payoff and profit of this strategy just prior to maturity if the NIFTY 50 is trading at INR16,500?

Which of the following statements best describes the derivative instrument that is embedded in the Baywhite Financial LLC Structured Note?

Which of the following statements best contrasts the credit risk of the Baywhite Financial LLC Structured Note with the counterparty credit risk of an investor entering into the embedded exchange-traded derivative on a stand-alone basis?

Which of the following statements most accurately describes the liquidity of the Baywhite Structured Note versus that of the embedded exchange-traded derivative?

Which of the following statements best describes how an investor should evaluate the terms of the Baywhite Financial LLC Structured Note as compared with the stand-alone derivative price in order to make a recommendation?

Match the following definitions with their corresponding forwawd pricing or valuation component</br> 1 - Equal to the difference between the current spot price (adjusted by remaining costs and benefits through maturity) and the present value of the forward price

Match the following definitions with their corresponding forwawd pricing or valuation component </br>2 - Future value of the underlying asset spot price (S₀) compounded at the risk-free rate incorporating the present value of the costs and benefits of asset ownership

Match the following definitions with their corresponding forwawd pricing or valuation component </br>3 - Under no-arbitrage conditions for a given underlying spot price, S₀, adjusted by the costs and benefits, risk-free rate (<i>r</i>), and forward price, F₀(T), this should be equal to zero (ignoring transaction costs).

A Baywhite client currently owns 5,000 common non-dividend-paying shares of Vivivyu Inc. ( VIVU), a digital media company, at a spot price of USD173 per share. The client enters into a for ward commitment to sell half of its VIVU position in six months at a price of USD175.58. Which of the following market events is most likely to result in the greatest gain in the VIVU forward contract MTM value from the client’s perspective?

A Baywhite client has entered into a long six-month MXN/USD FX forward contract—that is , an agreement to sell MXN and buy USD. The MXN/USD spot exchange rate at inception is 19.8248 (MXN19.8248 = USD1), the six-month MXN risk-free rate is 4.25%, and the six-month USD risk-free rate is 0.5%. Baywhite’s market strategist predicts that the Mexican central bank (Banco de Mexico) will surprise the market with a 50 bp short-term rate cut at its upcoming meeting. Which of the following statements best describes how the client’s exist ing FX for ward contract will be impacted if this prediction is realized and other parameters remain unchanged?

A client seeking advice on her fixed-income portfolio observes the price and yield-to-maturity of one-year (<i>r₁</i>) and two-year (<i>r₂</i>) annual coupon government benchmark bonds currently available in the market. Which of the following statements best describes how the analyst can determine a breakeven reinvestment rate in one year ’s time to help decide whether to invest now for one or two years?

Baywhite Financial seeks to gain a competitive advantage by making margin loans at fixed rates for up to 60 days to its investor clients. Since Baywhite borrows at a variable one-month market reference rate to finance these client loans , the firm enters into one-month FRA contracts on one-month MRR to hedge the interest rate exposure of its margin loan book. Which of the following statements best describes Baywhite’s interest rate exposure and the FRA position it should take to hedge that exposure?

Baywhite observes that one-month MRR is 1.2% and two-month MRR is 1.5%. Which of the following rates is closest to the forward rate that Baywhite would expect on 1m1m forward rate agreement?

<p>Ace serves as a futures commission merchant to assist several of its commodity trading adviser (CTA) clients to clear and settle their futures margin positions with the futures exchange. Ace is reviewing the copper futures market for a CTA client considering a long copper futures position for the first time. Details of the copper futures market are as follows:</p> </br> <table style="width:90%;text-align:left"> <caption>CME Copper Futures Contract Specifications</caption> <tr><th>Contract Maturities:</th><td>Monthly [from 1 month to 15 months]</td></tr> <tr><th>Contract Size:</th><td>25,000 pounds</td></tr> <tr><th>Delivery Type:</th><td>Cash settled</td></tr> <tr><th>Price Quotation:</th><td>$ per pound</td></tr> <tr><th>Initial Margin:</th><td>$10,000 per contract</td></tr> <tr><th>Maintenance Margin:</th><td>$6,000 per contract</td></tr> <tr><th>Final Maturity:</th><td>Last CME business day of contract month</td></tr> <tr><th>Daily Settlement:</th><td>CME Trading Operations calculates daily settlement values based on its published procedures</td></tr> </table> </br> <p>Today’s copper spot price is $4.25 per pound, and the constant risk-free rate is 1.875%. Each contract has a $10 storage cost payable at the end of the month. Which of the following statements best characterizes the margin exposure profile of Ace’s CTA client if it enters a one-month copper futures contract?</p>

One of Ace’s investor clients has entered a long six-month forward transaction with Ace on 100 shares of Xenaliya (XLYA), a non-dividend-paying technology stock. The stock’s spot price per share, S₀, is €85, and the risk-free rate is a constant 1% for all maturities. Ace has hedged the client transaction with a long six-month XLYA futures contract at a price f₀(T) of €85.42 and posted initial margin of €1,000. Three months after the forward and futures contracts are initiated, XYLA announces a strategic partnership with a major global technology firm, and its spot share price jumps €15 on the day’s trading to close at €123. Which of the following statements best characterizes the impact of the day’s trading on the MTM value of the forward versus the futures contract?

Identify which of the following corresponds to which description </br>1 - Long interest rate futures position

Identify which of the following corresponds to which description </br>2 - Pay fixed (receive floating) FRA contract

Identify which of the following corresponds to which description </br>3 - Receive fixed (pay floating) FRA contract

Ace’s investor clients usually use OTC forward transactions that Ace must clear with a central counterparty. Which of the following statements related to the impact on Ace from clearing these positions is most accurate?

Identify which of the following statements is associated with which Ace counterparty swap position </br>1 - Ace’s counterparty with this swap position will realize an MTM gain if implied forward rates rise.

Identify which of the following statements is associated with which Ace counterparty swap position </br>2 - Ace’s counterparty with this swap position will make a net payment if the initial market reference rate sets above the fixed swap rate.

Identify which of the following statements is associated with which Ace counterparty swap position </br> 3 - Ace’s counterparty with this position will face an initial swap contract value (ignoring transaction and counterparty credit costs) of zero.

Ace’s client is an asset manager with a significant portion of its fixed-rate bond investment portfolio maturing soon. Ace intends to reinvest the proceeds in five-year bond maturities. Which of the following describes the best course of action in the derivatives market for Ace’s client to address its bond reinvestment risk?

Ace enters a 10-year GBP interest rate swap with a client in which Ace receives an initial six-month GBP MRR of 1.75% and pays a fixed GBP swap rate of 3.10% for the first semiannual period. Which of the following statements best describes the value of the swap from Ace’s perspective three months after the inception of the trade?

Ace enters a 10-year GBP interest rate swap with a client in which Ace receives an initial six-month GBP MRR of 1.75% and pays a fixed GBP swap rate of 3.10% for the first semiannual period. Six months later, Ace and its counterparty settle the first swap payment, and no change has occurred in terms of future interest rate expectations. Which of the following statements best describes the value of the swap from Ace’s perspective?

At time <i>t</i> = 0, Ace observes the following zero rates over three periods: </br> <table style="width:90%;text-align:center"> <tr><th class="left">Periods</th><th>Zero Rates</th></tr> <tr><td class="left">1</td><td>2.2727%</td></tr> <tr><td class="left">2</td><td>3.0323%</td></tr> <tr><td class="left">3</td><td>3.6355%</td></tr> </table> Which of the following best describes how Ace arrives at a three-period par swap rate (s₃)?

Ace’s issuer client has swapped its outstanding fixed-rate debt to floating to match asset portfolio cash flows that generate an MRR-based return. Which of the following statements best describes how Ace’s MTM credit exposure to the issuer changes if interest rates rise immediately following trade inception?

Which of the following statements correctly describes the put option and call option premiums given the relationship between Biomian’s current price of INR 295 and the exercise price equal to the forward price of INR 300.84?

Which of the following statements correctly describes an important distinction between the two strategies of buying a put option and selling a call option with respect to option time value decay?

VFO is considering the purchase of the put option to hedge against a decline in Biomian’s share price. Which of the following statements best characterizes the trade-off between the put and the forward based on no-arbitrage pricing?

In evaluating the purchased put strategy (with <i>X</i> = <i>F₀(T)</i>), the CIO has asked you to consider selling the put in three months’ time if its price appreciates over that period. Which of the following best characterizes the no-arbitrage put price at that time?

VFO is considering a sold call strategy to generate income from the sale of a call. In your scenario analysis of the sold call option alternative, VFO has asked you to value the call option in three months’ time if Biomian’s spot price is INR 325 per share. Given an estimated call price of INR 46.41 at that time, which of the following correctly reflects the relationship between the call’s exercise value and its time value?

Which of the following statements correctly describes how VFO could replicate selling a call option on Biomian if exercise is certain?

In comparing the sold call and purchased put strategies at the forward price, VFO’s CIO is concerned about how an increase in the volatility of the underly ing Biomian shares affects option premiums. Which of the following statements about volatility change and its effect on strategy is most accurate?

In comparing the Biomian purchased put and sold call strategies , which of the following statements is most correct about how the call and put values are affect ed by changes in factors other than volatility?

VFO is concerned about the potential for increasing interest rates in the future. Which of the following statements provides the most correct description as to how rising rates after entering into the two option strategies would affect the option valuations?

SCSI is considering the sale of a three-month call on CWI shares. If you observe a traded put price with the same underlying details , which of the following statements best describes how to derive the no-arbitrage call price?

Due to the recent sharp rise in CWI’s share price, SCSI is recommending that clients consider protective put strategies for three- to six-month tenors. If you observe that a six-month CWI call option at an exercise price of CNY120 is trading at a price of CNY22.60, which answer is closest to what you would expect to pay for a six-month put option with the same underlying terms?

You realize that the six-month put option on CWI shares is overpriced relative to the no-arbitrage price from Question 2. Which of the following statements best describes the steps you would take to earn a riskless arbitrage profit under this scenario?

In her most recent research note on CWI, SCSI’s equity analyst specifically men tions an increase in CWI’s leverage ratio as a reason for her bearish outlook on the stock. Applying the put–call parity relationship to the value of the firm, which of the following statements most accurately describes the CWI outlook in terms of option pricing?

Which of the following choices best describes how SCSI could replicate a long risk-free bond return using a forward contract on CWI and call and put options on CWI?

SCSI observes that a 3-month call option on CWI with an exercise price of CNY 130 trades at a premium of CNY 3. A 3-month forward contract on CWI trades at a forward price of CNY 128.76. Which of the following choices is closest to the correct premium for a 3-month put option with an exercise price of CNY 130 on CWI?

Ratios are an input into which step in the financial statement analysis framework?

Which phase in the financial statement analysis framework is most likely to involve producing updated reports and recommendations?

Which of the following best describes the role of financial statement analysis?

The primary role of financial statement analysis is best described as:

International Financial Reporting Standards are currently developed by which entity?

USGAAP are currently developed by which entity?

A core objective of the International Organization of Securities Commissions is to:

Which of the following best describes why the notes that accompany the financial statements are required? The notes:

Accounting policies , methods , and estimates used in preparing financial statements are most likely to be found in the:

Information about management and director compensation is most likely to be found in the:

Information about a company ’s objectives , strategies , and significant risks are most likely to be found in the:

What type of audit opinion is preferred when analyzing financial statements?

An auditor determines that a company ’s financial statements are prepared in accordance with applicable accounting standards except with respect to inventory reporting. This exception is most likely to result in an audit opinion that is:

An independent audit report is most likely to provide:

Interim financial reports released by a company are most likely to be:

Which of the following sources of information used by analysts is found outside a company ’s annual report?

In contrast to earnings quality, financial reporting quality most likely pertains to:

The information provided by a low-quality financial report will most likely:

To properly assess a company ’s past performance, an analyst requires:

Low quality earnings most likely reflect :

Earnings that result from non-recurring activities most likely indicate:

Which attribute of financial reports would most likely be evaluated as optimal in the financial reporting spectrum?

Financial reports of the lowest level of quality reflect :

When earnings are increased by deferring research and development (R&D) investments until the next reporting period, this choice is considered:

A high-quality financial report may reflect :

If a particular accounting choice is considered aggressive in nature, then the financial performance for the reporting period would most likely:

Conservative accounting choices will most likely lead to:

Which of the following is most likely to be considered a potential benefit of accounting conservatism?

Which of the following statements most likely describes a situation that would motivate a manager to issue low-quality financial reports? The manager has:

Which of the following concerns would most likely motivate a manager to make conservative accounting choices?

Which of the following conditions best explains why a company ’s manager would obtain legal, accounting , and board level approval prior to issuing low-quality financial reports?

A company is experiencing a period of strong financial performance. To increase the likelihood of exceeding analysts’ earnings forecasts in the next reporting period, the company would most likely undertake accounting choices for the period under review that :

Which of the following situations represents a motivation, rather than an opportunity, to issue low-quality financial reports?

Which of the following situations will most likely motivate managers to inflate reported earnings?

Which of the following best describes an opportunity for management to issue low-quality financial reports?

An audit opinion of a company ’s financial reports is most likely intended to:

If a company uses a non-GAAP financial measure in an SEC filing , then the company must :

A company wishing to increase earnings in the reporting period may choose to:

Which technique most likely increases the cash flow provided by operations?

Bias in revenue recognition would least likely be suspected if :

Which of the following is an indication that a company may be recognizing revenue prematurely? Relative to its competitors , the company ’s:

Which of the following would most likely signal that a company may be using aggressive accrual accounting policies to shift current expenses to later periods? O ver the last five-year period, the ratio of cash flow to net income has:

An analyst reviewing a firm with a large reported restructuring charge to earnings should:

Comparison of a company ’s financial results to other peer companies for the same time period is called:

An analyst observes a decrease in a company ’s inventory turnover. Which of the following would most likely explain this trend?

Which of the following would best explain an increase in receivables turnover?

Brown Corporation had average days of sales outstanding of 19 days in the most recent fiscal year. Brown wants to improve its credit policies and collection practices and decrease its collection period in the next fiscal year to match the industry average of 15 days. Credit sales in the most recent fiscal year were $300 million, and Brown expects credit sales to increase to $390 million in the next fiscal year. To achieve Brown’s goal of decreasing the collection period, the change in the average accounts receivable balance that must occur is closest to:

Based on the data in Exhibit 1, what is the analyst least likely to conclude?

To assess a company ’s ability to fulfill its long-term obligations , an analyst would most likely examine:

Which of the following would be the analyst’s most likely conclusion?

What would be the most reasonable explanation of the financial data?

Which of the following choices best describes reasonable conclusions that the analyst might make about the two companies’ ability to pay their current and long-term obligations?

The company ’s total assets at year-end FY9 were GBP3,500 million. Which of the following choices best describes reasonable conclusions an analyst might make about the company ’s efficiency?

Which of the following choices best describes reasonable conclusions an analyst might make about the company ’s solvency?

Which of the following choices best describes reasonable conclusions an analyst might make about the company ’s liquidity?

Which of the following choices best describes reasonable conclusions an analyst might make about the company ’s profitability?

Based only on the information above, the most appropriate conclusion is that, over the period FY13 to FY15, the company ’s:

Which of the following choices best describes reasonable conclusions an analyst might make based on this ROE decomposition?

A decomposition of ROE for Company A and Company B is as follows: An analyst is most likely to conclude that :

When developing forecasts , analysts should most likely:

Which profitability metric should French use to assess Archway’s five-year historic performance relative to its competitors?

Based on the current competitive landscape presented in Exhibit 1, French should conclude that Archway ’s ability to:

Based on the current competitive landscape presented in Exhibit 1, Archway ’s operating profit margins over the forecast horizon are least likely to:

Based on Exhibit 2, Archway ’s forecasted gross profit margin for 2020 is closest to:

French’s approach to forecasting Archway ’s working capital accounts would be most likely classified as a:

The most appropriate response to Wright’s question about the technological development is to:

If the luxury electronic auto equipment industry is subject to rapid technological changes and market share shifts , how should French best adapt his approach to modeling?

Using Porter ’s five forces analysis , which of the following competitive factors is most likely to have the greatest impact on Omikroon’s petrol scooter pricing power?

The metric used by Fromm to assess Omikroon’s performance incorporates:

Based on Omikroon’s expectations , the gross profit margin of Omikroon’s electric scooter division in 2021 is most likely to be affected by :

Which factor best justifies the five-year forecast horizon for Omikroon selected by Fromm?

Fromm’s sensitivity analysis will result in a decrease in the 2020 base case gross profit margin closest to:

Fromm’s estimate of growth capital expenditures included in Omikroon’s PP&E under Scenario 1 should be:

To validate the forecast for rapid growth in the electronic scooter market over the next 10 years , Fromm speaks to the management of Omikroon and investor relations of ZeroWheel, a competitor. Which behavioral bias is Fromm most likely subject to?

Based on Exhibit 1, which of the following provides the strongest evidence that Chrome displays economies of scale?

Based on Exhibit 2, the job candidate most likely using a bottom-up approach to model net sales is:

Based on Exhibit 2, the modeling approach used by Candidate B to project future net sales is most accurately classified as a:

Based on Exhibits 1 and 2, Candidate C ’s forecast for cost of sales in 2020 is closest to:

Based on Exhibits 1 and 2, Candidate A’s forecast for SG&A expenses in 2020 is closest to:

Based on Exhibit 2, forecasted interest expense will reflect changes in Chrome’s debt level under the forecast assumptions used by :

Candidate B asks Green if she had additional information on Horizon’s industr y peers and competitors , to put the profitability estimates in a richer context. By asking for this additional information for their analysis , Candidate B is most likely seeking to mitigate which behavioral bias?

Under IFRS, income includes increases in economic benefits from:

Under the accrual basis of accounting , how much net revenue would be reported on Fairplay ’s 2009 income statement?

Apex Consignment sells items over the internet for individuals on a consignment basis. Apex receives the items from the owner, lists them for sale on the internet, and receives a 25 percent commission for any items sold. Apex collects the full amount from the buyer and pays the net amount after commission to the owner. Unsold items are returned to the owner after 90 days. During 2009, Apex had the following information:<br> ■ Total sales price of items sold during 2009 on consignment was EUR2,000,000.<br> ■ Total commissions retained by Apex during 2009 for these items was EUR500,000.<br> How much revenue should Apex report on its 2009 income statement?

A company previously expensed the incremental costs of obtaining a contract. All else being equal, adopting the May 2014 IASB and FASB converged accounting standards on revenue recognition makes the company ’s profitability initially appear:

Under IFRS, a loss from the destruction of property in a fire would most likely be classified as:

A company chooses to change an accounting policy. This change requires that, if practical, the company restate its financial statements for:

For 2009, Flamingo Products had net income of USD1,000,000. At 1 Januar y 2009, there were 1,000,000 shares outstanding. On 1 July 2009, the company is- sued 100,000 new shares for USD20 per share. The company paid USD200,000 in dividends to common shareholders. What is Flamingo’s basic earnings per share for 2009?

A company with no debt or convertible securities issued publicly traded common stock three times during the current fiscal year. Under both IFRS and US GAAP, the company ’s:

During 2009, CSI also had 10,000 options outstanding with exercise prices of USD10 each. The average stock price of CSI during 2009 was USD15. For purposes of computing diluted earnings per share, how many shares would be used in the denominator?

For its fiscal year-end, Calvan Water Corporation (CWC) reported net income of USD12 million and a weighted average of 2,000,000 common shares outstanding. The company paid USD800,000 in preferred dividends and had 100,000 options outstanding with an average exercise price of USD20. CWC ’s market price over the year averaged USD25 per share. CWC ’s diluted EPS is closest to:

Which statement about the calculation of LB’s EPS is most accurate?

Cell Services Inc. (CSI) had 1,000,000 average shares outstanding during all of 2009. During 2009, CSI also had 10,000 options outstanding with exercise prices of USD10 each. The average stock price of CSI during 2009 was USD15. For purposes of computing diluted earnings per share, how many shares would be used in the denominator?

When calculating diluted EPS, which of the following securities in the capital structure increases the weighted average number of common shares outstanding without affecting net income available to common shareholders?

Which statement is most accurate? A common size income statement :

All of the following are current assets except:

The initial measurement of goodwill is most likely affected by :

For financial assets classified as trading securities , how are unrealized gains and losses reflected in shareholders’ equity?

For financial assets classified as available for sale, how are unrealized gains and losses reflected in shareholders’ equity?

For financial assets classified as held to maturity, how are unrealized gains and losses reflected in shareholders’ equity?

A company has total liabilities of GBP35 million and total stockholders’ equity of GBP55 million. Total liabilities are represented on a vertical common-size balance sheet by a percentage closest to:

Which of the following would an analyst most likely be able to determine from a common-size analysis of a company ’s balance sheet over several periods?

Defining total asset turnover as revenue divided by average total assets , all else equal, impairment write-downs of long-lived assets owned by a company will most likely result in an increase for that company in:

An investor concerned about a company ’s ability to meet its near-term obligations is most likely to calculate the:

The most stringent test of a company ’s liquidity is its:

An investor worried about a company ’s long-term solvency would most likely examine its:

Which statement is correct?

The quick ratio for Company A is closest to:

The financial leverage ratio for Company B is closest to:

Which ratio indicates lower liquidity risk for Company A compared with Company B?

Based on the information in Exhibit 1 for Pinkerly Inc., a fictitious company, what are the total adjustments that the company would make to net income in order to derive operating cash flow? <table style="width:90%;text-align:center"> <caption>Exhibit 1: Pinkerly Inc.</caption> <tr><td></td><th colspan="3">Year Ended</th></tr> <tr><td class="left">Income statement</td><td></td><td></td><td></td></tr> <tr><td class="left">item </td><td></td><td>12/31/2018</td><td></td></tr> <tr><td class="left">Net income</td><td> </td><td>USD30 million</td><td></td></tr> <tr><td class="left">Depreciation</td><td></td><td> USD7 million</td><td></td></tr> <tr><td class="left"></td><td></td><td></td><td></td></tr> <tr><td class="left">Balance sheet item </td><td>12/31/2017 </td><td>12/31/2018</td><td> Change</td></tr> <tr><td class="left">Accounts receivable </td><td>USD15 million </td><td>USD30 million </td><td>USD15 million</td></tr> <tr><td class="left">Inventory </td><td>USD16 million </td><td>USD13 million </td><td>(USD3 million)</td></tr> <tr><td class="left">Accounts payable </td><td>USD10 million</td><td> USD20 million</td><td> USD10 million</td></tr> </table>

When computing net cash flow from operating activities using the indirect method, an addition to net income is most likely to occur when there is a:

An analyst gathered the information in Exhibit 1 from a company ’s 2018 financial statements<br><table style="width:90%;text-align:center"> <caption>Exhibit 1: 2018 Financial Statement (US dollars, millions).</caption> <tr><th class="left">Balances as of Year Ended 31 December</th><th> 2017</th><th> 2018</th></tr> <tr><td class="left">Retained earnings </td><td>120 </td><td>145</td></tr> <tr><td class="left">Accounts receivable</td><td> 38 </td><td>43</td></tr> <tr><td class="left">Inventory </td><td>45</td><td>48</td></tr> <tr><td class="left">Accounts payable </td><td>36 </td><td>29</td></tr> </table><br>In 2018, the company declared and paid cash dividends of USD10 million and recorded depreciation expense in the amount of USD25 million. The company considers dividends paid a financing activity. The company’s 2018 cash flow from operations (in USD millions) was closest to:

Based on the information in Exhibit 1 for Star Inc., what are the total net ad- justments that the company would make to net income to derive operating cash flow? <table style="width:90%;text-align:center"> <caption>Exhibit 1: Star Inc.</caption> <tr><td></td><th colspan="3">Year Ended</th></tr> <tr><td class="left">Income statement</td><td></td><td></td><td></td></tr> <tr><td class="left">item </td><td></td><td>12/31/2018</td><td></td></tr> <tr><td class="left">Net income</td><td> </td><td>USD20 million</td><td></td></tr> <tr><td class="left">Depreciation</td><td></td><td> USD2 million</td><td></td></tr> <tr><td class="left"></td><td></td><td></td><td></td></tr> <tr><td class="left">Balance sheet item </td><td>12/31/2017 </td><td>12/31/2018</td><td> Change</td></tr> <tr><td class="left">Accounts receivable </td><td>USD25 million </td><td>USD22 million </td><td>USD3 million</td></tr> <tr><td class="left">Inventory </td><td>USD10 million </td><td>USD14 million </td><td>(USD4 million)</td></tr> <tr><td class="left">Accounts payable </td><td>USD8 million</td><td> USD13 million</td><td> USD5 million</td></tr> </table>

In 2018, a company using US GAAP made cash payments of USD6 million for salaries , USD2 million for interest expense, and USD4 million for income taxes. Additional information for the company is provided in the Exhibit 1: <table style="width:90%;text-align:center"> <caption>Exhibit 1: Cash Payments</caption> <tr><th class="left">(US dollars, millions) </th><th>2017 </th><th>2018</th></tr> <tr><td class="left">Revenue </td><td>42</td><td> 37</td></tr> <tr><td class="left">Cost of goods sold </td><td>18 </td><td>16</td></tr> <tr><td class="left">Inventory </td><td>36 </td><td>40</td></tr> <tr><td class="left">Accounts receivable </td><td>22 </td><td>19</td></tr> <tr><td class="left">Accounts payable </td><td>14 </td><td>12</td></tr> </table> Based only on the information in Exhibit 1, the company ’s operating cash flow for 2018 is closest to:

Green Glory Corp., a garden supply wholesaler, reported cost of goods sold for the year of USD80 million. Total assets increased by USD55 million, including an increase of USD5 million in inventor y. Total liabilities increased by USD45 million, including an increase of USD2 million in accounts payable. The cash paid by the company to its suppliers is most likely closest to:

Purple Fleur S.A., a retailer of floral products , reported cost of goods sold for the year of USD75 million. Total assets increased by USD55 million, but inven- tory declined by USD6 million. Total liabilities increased by USD45 million, and accounts payable increased by USD2 million. The cash paid by the company to its suppliers is most likely closest to:

White Flag , a women’s clothing manufacturer, reported salaries expense of USD20 million. The beginning balance of salaries payable was USD3 million, and the ending balance of salaries payable was USD1 million. How much cash did the company pay in salaries?

An analyst gathered the information in Exhibit 1 from a company ’s 2018 financial statements:<table style="width:90%;text-align:center"> <caption>Exhibit 1: 2018 Financial Statements (US dollars, millions)</caption> <tr><th class="left">Year ended 31 December </th><th>2017 </th><th>2018</th></tr> <tr><td class="left">Net sales </td><td>245.8 </td><td>254.6</td></tr> <tr><td class="left">Cost of goods sold </td><td>168.3 </td><td>175.9</td></tr> <tr><td class="left">Accounts receivable </td><td>73.2 </td><td>68.3</td></tr> <tr><td class="left">Inventory </td><td>39.0 </td><td>47.8</td></tr> <tr><td class="left">Accounts payable </td><td>20.3 </td><td>22.9</td></tr> </table>Based only on the information in Exhibit 1, the company’s 2018 statement of cash flows in the direct format would include amounts (in US dollars millions) for cash received from customers and cash paid to suppliers, respectively, that are closest to: <table style="width:90%;text-align:center"> <tr><th class="left"> </th><th>Cash received from customers </th><th>Cash paid to suppliers</th></tr> <tr><td class="left">A </td><td>249.7</td><td>169.7</td></tr> <tr><td class="left">B </td><td>259.5</td><td>174.5</td></tr> <tr><td class="left">C </td><td>259.5</td><td>182.1</td></tr> </table>

Golden Cumulus Corp., a commodities trading company, reported interest expense of USD19 million and taxes of USD6 million. Interest payable increased by USD3 million, and taxes payable decreased by USD4 million over the period. How much cash did the company pay for interest and taxes?

The information in Exhibit 1 is extracted from Sweetfall Incorporated’s financial statements. <table style="width:90%;text-align:center"> <caption>Exhibit 1: Sweetfall Inc.</caption> <tr><th colspan="2">Income Statement </th><th colspan="2">Balance Sheet Changes</th></tr> <tr><td class="left">Revenue</td><td> USD56,800</td><td> Decrease in accounts receivable</td><td> USD1,324</td></tr> <tr><td class="left">Cost of goods sold </td><td>27,264</td><td> Decrease in inventory</td><td> 501</td></tr> <tr><td class="left">Other operating expense </td><td>562</td><td> Increase in prepaid expense</td><td> 6</td></tr> <tr><td class="left">Depreciation expense </td><td>2,500</td><td> Increase in accounts payable </td><td>1,0</td></tr> </table> The amount of cash Sweetfall Inc. paid to suppliers is:

One appropriate method of preparing a common-size cash flow statement is to show each line item:

Which of the following is an appropriate method of computing free cash flow to the firm?

The first step in cash flow statement analysis should be to:

An analyst has calculated a ratio using as the numerator the sum of operating cash flow, interest, and taxes and as the denominator the amount of interest. What is this ratio, what does it measure, and what does it indicate?

Carr ying inventory at a value above its historical cost would most likely be permitted if :

Summary of significant accounting policies: Inventories. Inventories are valued at cost, not in excess of market. Cost is determined on the “average-cost” basis , except for the cost of finished products carried by certain subsidiary companies, which is determined on a last-in, first-out (LIFO) basis. Inventories valued on the LIFO basis totaled JPY94,578 million and JPY50,037 million at 31 December 2017 and 2018, respectively. Had the FIFO basis been used for those companies using the LIFO basis, inventories would have been JPY10,120 million and JPY19,660 million higher than reported at 31 December 2017 and 2018, respectively.

Fernando’s Pasta purchased inventory and later wrote it down. The current net realizable value is higher than the value when written down. Fernando’s inventor y balance will most likely be:

A write-down of the value of inventory to its net realizable value will have a positive effect on the:

Zimt AG uses the FIFO method, and Nutmeg Inc. uses the LIFO method. Compared to the cost of replacing the inventory, during periods of rising prices , the cost of sales reported by :

Zimt AG uses the FIFO method, and Nutmeg Inc. uses the LIFO method. Compared to the cost of replacing the inventory, during periods of rising prices the ending inventory balance reported by :

Like many technology companies , TechnoTools operates in an environment of declining prices. Its reported profits will tend to be highest if it accounts for inventory using the:

Compared to using the weighted average cost method to account for inventory, during a period in which prices are generally rising , the current ratio of a company using the FIFO method would most likely be:

Zimt AG wrote down the value of its inventory in 2017 and reversed the write-down in 2018. Compared to the ratios that would have been calculated if the write-down had never occurred, Zimt’s reported that the 2017:

Zimt AG wrote down the value of its inventory in 2017 and reversed the write-down in 2018. Compared to the results the company would have reported if the write-down had never occurred, Zimt’s reported that the 2018:

Compared to a company that uses the FIFO method, during periods of rising prices a company that uses the LIFO method will most likely appear more:

Nutmeg , Inc. uses the LIFO method to account for inventory. During years in which inventory unit costs are generally rising and in which the company purchases more inventory than it sells to customers , its reported gross profit margin will most likely be:

Compared to using the FIFO method to account for inventor y, during periods of rising prices , a company using the LIFO method is most likely to report higher:

Carey Company reports under US GAAP, whereas Jonathan Company reports under IFRS. It is least likely that :

The costs least likely to be included by the CFO as inventory are:

What is the most likely justification for Century Chocolate’s choice of inventor y valuation method for its purchased finished goods?

In Kern’s comparative ratio analysis , the 2018 inventory turnover ratio for Century Chocolate is closest to:

The most accurate statement regarding Annan’s reasoning for requiring Kern to select a competitor that reports under IFRS for comparative purposes is that under US GAAP:

Annan’s statement regarding the perpetual and periodic inventory systems is most significant when which of the following costing systems is used?

Ignoring any tax effect, the change in net realizable value of the black licorice jelly beans from 2017 to 2018 will most likely result in:

If the trend noted in the ICCO report continues and Century Chocolate plans to maintain constant or increasing inventory quantities , the most likely impact on Century Chocolate’s financial statements related to its raw materials inventor y will be:

Crux’s inventory turnover ratio computed as of 31 December 2018, after the adjustments suggested by Groff, is closest to:

Rolby ’s net profit margin for the year ended 31 December 2018, after the adjust- ments suggested by Groff, is closest to:

Compared with its unadjusted debt-to-equity ratio, Mikko’s debt-to-equity ratio as of 31 December 2018, after the adjustments suggested by Groff, is:

Which company ’s gross profit margin would best reflect current costs of the industr y?

Would Rolby ’s valuation method show a higher gross profit margin than Crux’s under an inflationar y, a deflationar y, or a stable price scenario?

Which group of ratios usually appears more favorable with an inventor y write-down?

The management discussion and analysis (MD&A) indicated that the prices of raw material, other production materials , and parts increased. Based on the inventory valuation methods described in Note 2, which inventory classification would least accurately reflect current prices?

According to Exhibit 2, the 2018 Annual Report, if the company had used the FIFO inventory valuation method instead of the LIFO inventory valuation meth- od for a portion of its inventor y, the 2017 inventory value would be closest to:

If ZP had prepared its financial statement in accordance with IFRS, the inventory turnover ratio (using average inventory) for 2018 would be:

Inventory levels decreased from 2017 to 2018 for all of the following reasons e xcept:

Which observation is most likely a result of looking only at the information reported in Exhibit 2, Note 9?

Exhibit 2, Note 2, indicates that “inventories valued on the LIFO basis totaled JPY94,578 million and JPY50,037 million at 31 December 2017 and 2018, respec- tively.” Based on this , the LIFO reserve should most likely:

In Exhibit 2, the Industry and Business Risk excerpt states that, “Increased com- petition may lead to lower unit sales and excess production capacity and excess inventory. This may result in a further downward price pressure.” The downward price pressure could lead to inventory that is valued above current market prices or net realizable value. Any write-downs of inventory are least likely to have a significant effect on the inventory valued using:

During periods of rising inventory unit costs , a company using the FIFO method rather than the LIFO method will report a lower:

Compared with a company that uses the FIFO method, during a period of rising unit inventory costs , a company using the LIFO method will most likely appear more:

In a period of declining inventory unit costs and constant or increasing in- ventory quantities , which inventory method is most likely to result in a higher debt-to-equity ratio?

Based on this information, the amount of impairment loss that WLP will need to report on its income statement related to the manufacturing equipment is closest to:

Under IFRS, an impairment loss on a property, plant, and equipment asset is measured as the excess of the carr ying amount over the asset’s:

The impairment of intangible assets with finite lives affects:

With respect to Statement 1, which of the following is the most likely effect of management’s decision to expense rather than capitalize these expenditures?

With respect to Statement 2, what would be the most likely effect in 2023 if A MRC were to switch to an accelerated depreciation method for both financial and tax reporting?

With respect to Statement 3, what is the most likely effect of the impairment loss?

Based on Exhibit 1, the best estimate of the average remaining useful life of the company ’s plant and equipment at the end of 2022 is:

Jordan’s response about the financial statement impact of Alpha’s decision to capitalize the cost of its new computer system is correct with respect to:

Jordan’s response about the ratio impact of Alpha’s decision to capitalize interest costs is most likely correct with respect to the:

Jordan’s response about the impact of the different depreciation methods on net profit margin is most likely incorrect with respect to:

Jordan’s response about his approach to estimating a company ’s need to reinvest in its productive capacity is most likely correct regarding estimating the:

Jordan’s response about the effect of Beta’s impairment loss is incorrect with respect to the impact on its:

Jordan’s response about the effect of Alpha’s revaluation is most likely correct with respect to the impact on its:

The result of the sale of the vehicle is most likely:

CRO CO S.p.A sells an intangible asset with a historical acquisition cost of EUR12 million and an accumulated amortization of EUR2 million and reports a loss on the sale of EUR3.2 million. Which of the following amounts is most likely the sale price of the asset?

The gain or loss on a sale of a long-lived asset to which the revaluation model has been applied is most likely calculated using sales proceeds less:

According to IFRS, all of the following pieces of information about property, plant, and equipment must be disclosed in a company ’s financial statements and footnotes e xcept for:

According to IFRS, all of the following pieces of information about intangible assets must be disclosed in a company ’s financial statements and footnotes e xcept for:

Which of the following is a required financial statement disclosure for long-lived intangible assets under US GAAP?

Which of the three assets is an intangible asset with a finite useful life?

Intangible assets with finite useful lives mostly differ from intangible assets with infinite useful lives with respect to accounting treatment of :

Costs incurred for intangible assets are generally expensed when they are:

Under US GAAP, when assets are acquired in a business combination, goodwill most likely arises from:

Which of the following is a potential drawback of compensating employees with stock options?

Which of the following is typically an objective of a share-based compensation plan?

Which of the following statements is true?

Which of the following is a difference between a stock grant and a stock option grant?

Assume ABC Company, a fictional company provides the following disclosure about its stock compensation plans:<br> “The average fair value of shares granted was USD20.86, USD16.42, and USD17.80 in 2021, 2020, and 2019 respectively.” If the company granted 18,000 shares , with a three-year vesting period in 2021, what is the annual compensation expense for the 2021 shares granted?

Assume XYZ Company discloses the following information in its Stock Compensation note: As of 31 December 2021, we had USD630 million of unrecognized compensation cost related to nonvested stock-based compensation awards granted under our plan. We expect to recognize this cost over a weighted average period of 3.2 years as stock-based compensation expense. What is the expected compensation expense in 2025?

Beginning with fiscal year 2019, for leases with a term longer than one year, lessees report a right-to-use asset and a lease liability on the balance sheet :

For a lessor, the leased asset appears on the balance sheet and continues to be depreciated when the lease is classified as:

Under US GAAP, a lessor ’s reported revenues at lease inception will be highest if the lease is classified as:

Under both IFRS and US GAAP, a lessor in an operating lease recognizes: