Practice Test Geeks(ABA) Accredited Business Accountant Practice Test
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Financial Reporting and Analysis Flashcards

7 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Reporting and Analysis flashcards as text

  1. A vertical analysis of a balance sheet expresses each asset as a percentage of:

    Answer: Total assets

    In vertical analysis of the balance sheet, each item is stated as a percentage of total assets, providing a structural snapshot of asset composition.

  2. Which of the following is an example of an off-balance-sheet financing arrangement?

    Answer: Operating lease under old GAAP (pre-ASC 842)

    Under old GAAP, operating leases were not recorded on the balance sheet, allowing companies to use assets without recognizing the related liability.

  3. Return on assets (ROA) is calculated as:

    Answer: Net income divided by average total assets

    ROA measures how efficiently a company uses its assets to generate profit, calculated as net income divided by average total assets.

  4. When analyzing financial statements for comparability, a change from FIFO to LIFO inventory accounting requires:

    Answer: Prospective application only, from the period of change

    A change to the LIFO method is an exception under ASC 250 that requires only prospective application because retrospective calculation is impractical.

  5. A company's earnings per share (EPS) would be diluted by the existence of:

    Answer: Convertible bonds outstanding

    Convertible bonds, if converted, would increase the share count, thereby reducing (diluting) EPS, so they are included in diluted EPS calculations.

  6. Which of the following best describes a contingent liability?

    Answer: A potential obligation dependent on a future uncertain event

    A contingent liability is a potential obligation that will materialize only if a specific uncertain future event occurs, such as the outcome of pending litigation.

  7. The percentage-of-completion method for long-term contracts recognizes revenue:

    Answer: Proportionally as work is performed over the contract period

    The percentage-of-completion method matches revenue to the portion of the contract completed each period, based on costs incurred or milestones reached.