1. What are the roles of management and the auditor in the preparation and integrity of thefinancial statements?

2. Why do some unqualified opinions have explanatory paragraphs?

3. Will the accountant express an opinion on reviewed financial statements? Describe theaccountant's report for reviewed financial statements.

4. Why are notes to statements necessary?

5. What is the relationship between the accounting equation and the double-entry system of recording transactions?

1. Differentiate between horizontal and vertical analysis.

2. What is trend analysis?

3. Suppose you are comparing two firms within an industry. One is large and the other is small. Will relative or absolute numbers be of more value in each case?

4. What kinds of statistics can help evaluate relative size?

5. Brown Company earned 5.5% on sales in 2007. What further information would be needed to evaluate this result?

1. Give three possible causes of an adverse direct materials price variance.

2. Give three possible causes of a favorable direct labor rate variance.

3. Give three possible causes of a favorable direct materials usage variance.

4. Give three possible causes of an adverse direct labor efficiency variance.

5. Explain how you would identify which variances to investigate

1. What is the financial planning process? Contrast long-term (strategic) financial plans and short-term (operating) financial plans.

2. What is the purpose of the cash budget? What role does the sales fore-cast play in its preparation?

3. Briefly describe the basic format of the cash budget.

4. Why does the presence of fixed costs cause the percent-of-sales method of pro forma income statement preparation to fail? What is a better method?

5. Describe the judgmental approach for simplified preparation of the pro forma balance sheet.

1. What is the cost of capital?

2. What are the net proceeds from the sale of a bond? What are flotation costs, and how do they affect a bond's net proceeds?

3. What premise about share value underlies the constant-growth valuation (Gordon growth) model that is used to measure the cost of common stock equity, rs?

4. How do the constant-growth valuation model and capital asset pricing model methods for finding the cost of common stock differ?

5. What is the weighted average cost of capital (WACC), and how is it calculated?