CCA Financial Reporting & Analysis 3

Question 1

Under the effective interest method, bond discount amortization causes interest expense to be:

Accepted Answer

Greater than the coupon payment

Answer

When a bond is issued at a discount, the carrying value is below face value, so effective interest expense exceeds the stated coupon payment.

Question 2

A company's earnings per share (EPS) calculation must exclude which of the following from the share count for basic EPS?

Accepted Answer

Treasury shares

Answer

Treasury shares are repurchased shares held by the company and are excluded from both basic and diluted EPS calculations.

Question 3

Which ratio best measures a company's ability to meet short-term obligations using only its most liquid assets?

Accepted Answer

Cash ratio

Answer

The cash ratio (cash + cash equivalents / current liabilities) uses only the most liquid assets to measure short-term solvency.

Question 4

Deferred tax liabilities arise when:

Accepted Answer

Tax expense exceeds taxes currently payable

Answer

Deferred tax liabilities arise when tax expense on the income statement exceeds actual taxes currently owed to the government.

Question 5

The DuPont analysis breaks return on equity (ROE) into which three components?

Accepted Answer

Profit margin, asset turnover, financial leverage

Answer

DuPont analysis decomposes ROE into net profit margin × asset turnover × equity multiplier (financial leverage).

(CCA) Certified Corporate Accountant Practice Test