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.