Question
1.The starting point for developing comprehensive financial statement forecasts is a detailed understanding of the company, its recent financial performance and its health. True or
1.The starting point for developing comprehensive financial statement forecasts is a detailed understanding of the company, its recent financial performance and its health.
True or False
2. Consider the following table of Earnings Components:
| Firm A | Firm B | Firm C | |||||||||
| Reported EPS | $ | 12 | $ | 15 | $ | 18 | |||||
| Analysts EPS composition: | |||||||||||
| Permanent component (P = 5) | 80 | % | 60 | % | 75 | % | |||||
| Transitory component (T = 1) | 10 | % | 35 | % | 25 | % | |||||
| Value-irrelevant component (0 = 0) | 10 | % | 5 | % | 0 | % | |||||
The implied total earnings multiple of Firm B is:
Multiple Choice
1.00.
3.00.
3.35.
12.00
3. Consider the following table of Actual earnings:
| Firm A | Firm B | Firm C | |||||||||
| Actual earnings | $ | 6,000 | $ | 14,000 | $ | 18,000 | |||||
| r | 10 | % | 8 | % | 12 | % | |||||
| BVt-1 | $ | 100,000 | $ | 150,000 | $ | 190,000 | |||||
What are the abnormal earnings for Firm A?
Multiple Choice
$(4,000)
$(6,000)
$4,000
$6,000
4. Carrying amounts in a GAAP balance sheet are measured using all the following except:
Multiple Choice
historical cost.
net realizable value.
discounted present value.
projected ROI.
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