11/25/23,n6:28nAM CFInGeneralnquestionsnandnanswersnfornFMVAnCertificatio
n
CFInGENERALnQUESTIONAnANDnANSWERSnFORnFMVAnCERTIFICATION
1. Whichnofnthenfollowingnitemsnarennotnincludednwhenndeterminingnincomenfromnoperati
ons?n Taxes
2. Whichnrationwouldnyounusentondeterminenthenprofitabilitynofnthengoodsnsoldnbynancom
pany?n Grossnprofitnmargin
00:43n01:44
3. Whennperformingnanverticalnanalysisnwhichnincomenstatementnitemndonyounusentondetermin
enthen costncontributionnforneachnexpensencategory?ntiWhatnisnthendenominator?)
Sales
4. Horizontalnanalysisnallowsnusntonanalyzenperformancenov
er:n Time
5. Whenncalculatingnthenquicknrationorn"acidntest"nwhichncurrentnassetnornliabilitynisnomi
tted?n Inventory
6. Fornwhichnorganizationnwouldnyounexpectntonseenthenhighestninventorynturnovernr
atio?n Grocerynretailer
7. Whatnactionsncouldnancompanyntakentonreducenitsnworkingncapitalnfundingn
gap?n Tightenncustomerncreditnterms
8. Thendebtntonequitynrationindicates:
Thenproportionnofnthencompanynfinancednbynlendersnversusnowners
9. Whichnofnthenfollowingnitemsnarennotnincludedninnworkingncapi
tal?n Shortntermninvestments
10. Whenncalculatingnturnovernofnpropertynplantn&nequipmentnandnreceivables,nwhichnitemnfro
mnthen incomenstatementndonwenuse?
Sales
11. Ifnancompanynwantedntonfinancenthenpurchasenofnequipmentnwithoutndilutingnshareholdersne
quity,n whichnofnthenfollowingnoperationncouldnitnconsider?
Obtainingnanloannfromnanbank
12. Workingncapitalnmovementnisnincludedninnwhichnsectionnofnthencashnflownstatem
ent?n Operatingnactivities
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n
00:03n01:44
13. Thendebtntontangiblennetnworthnrationisncalculatednasnfoll
ows:n InterestnBearingnLiabilitiesn/ntiEquitynfinIntangiblenAssets)
14. Ifnthentotalnassetsntonequitynrationofnancompanynisnincreasing,nitnisnpossiblenthat:
Thencompanynisnincreasingnthenusenofndebtnandngettingnhighernfinancialnleverage
15. Whichnrationisnnotnonenofnthenthreenratiosnthatnmultiplyntogetherntonproducenthenreturnnon
nequityn ratio?
Operatingnprofitnmargin
16. Whichnfinancialnleveragenrationisnusednwithntwonothernratiosntonmathematicallynproduc
enthen returnnonnequitynratio?
TotalnAssetsn/nEquity
17. Whichnofnthenfollowingnisnantertiarynrationthatndrivesnprofitabil
ity?n SG&AnExpensen/nSales
18. Whichnratiosnindicatenhownefficientlynthencompanyngeneratesnsalesnfromnitsnassets?
Workingncapitalnturnover
19. Thennetnprofitnmarginnrationcannmathematicallynbenbrokenndownnasn"TaxnimpactnxnC
apitaln structurenimpactnx..."
EBITn/nSales
20. BasednonnthenfollowingninformationnfromnABCnCompany'snfinancialnanalysis,nwhichnoneno
fnthen followingnstatementsnisnNOTntrue?
Thencompany'snabilityntoncovernitsnshortfitermnobligationsnisngettingnhighernovernthenfivenyears.
21. Whichnofnthenfollowingnbestndescribesnaccountingnprinciplesninngeneral?
Theynoutlinenthenfundamentalnrulesnandnconceptsnandnestablishnthenframeworknonnwhichndetailedn a
ccountingnstandardsnarenbased.
22. Ansoundnaccountingnframeworknallowsnfornallnofnthenfollowingnbenefitsnex
cept:n Identicalnitemsnbeingnreportednonnthenfinancialnstatementsnofndifferentn
companies
23. ConservatismnPrinciple
Itnprovidesnguidancenonnhowntonrecordntransactionsnwhenntherenisnuncertainty.
24. HistoricalnCostnPrinciple
Itnstatesnthatnassetsnandnliabilitiesnarenrecordednonnthenfinancialnstatementsnatnthencostnatnwhichnthe
ynweren acquirednornassumed.
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n
25. ObjectivitynPrinciple
Itnstatesnthatnfinancialnstatementsnmustnbenfreenfromnbiasnandnbasednonnverifiablenevidence.
26. EconomicnEntitynPrinciple
Itnstatesnthatntransactionsncarriednoutnbynanbusinessnarenseparatednfromnthosenconductednbynitsnowner.
27. MatchingnPrinciple
Itnstatesnthatnthenexpensesnofnanbusinessnshouldnbenrecordedninnthenperiodsninnwhichnthencorrespon
dingn revenuesnarenearned.
28. OnnMarchn1st,nMr.nSmithensignednupnfornanfitnessnprogramnatnFitnCo.nandnpaidn$960nfornth
enentiren programnupfront.nThenprogramnincludesnantotalnofn12nsessionsnandntwonsessionsnare
ndeliveredneachn month.nHownmuchnrevenuenfromnMr.nSmithenshouldnFitnCo.nrecognize natnthe
nendnofnMarch?
$160
29. Whichnofnthenfollowingncharacteristicsndoesnnotnenhancenthenusefulnessnofnfinancialninforma
tion?n Relevance
30. Identifynthenstatementnthatnisnmostnaccurate.
Financialninformationnthatnhasnconfirmatorynvaluenprovidesnfeedbacknthatneithernconfirmsnornchanges
n previousnevaluations.
31. Whichnofnthenfollowingnisnnotnancorrectndescriptionnofnhownannoperatingnleasenisnrecognizedn
onnthen financialnstatements?
Thenamortizationnexpensenofnthenrightfioffiusenassetnisncalculatednusingnthenstraightfilinendepreciation
n methodnovernthenleasenterm.
34. CompanynInc.nentersnintonan10fiyearnfinancenleasenatnthenbeginningnofn2021nfornantotalnofn$250
,000.n Thenannualnleasenpaymentnisn$25,000ntipayablenatnthenendnofneachnyear)nandnthenratenimplic
itninnthenleasen isn5%.nNoninitialndirectncostsnarenincurred.nHownmuchninterestnexpensenshouldnbenr
ecognizedninn2021?
$9,652
35. Whichnofnthenfollowingnstatementsnaboutnincomentaxesnisnnotncorrect?
Deductiblentemporaryndifferencesngivenrisentondeferredntaxnliabilities,nmeaningnthatnmorentaxnisnpaya
bleninn thenfuture.
36. Generallynarisenwhenntherenarendifferencesnthatnresultninncurrentnaccountingnincomenbeingngr
eatern thanntaxablenincome
TaxablenTemporaryn Differences
37. Givenrisentondeferredntaxnasse
tsn DeductiblenTemporarynDiffere
nces
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n
38. Generallynarisenwhennthentaxnbasenofnthenassetsnisngreaternthannthencarryingna
mountn DeductiblenTemporarynDifferences
39. Arisenwhennthentaxnbasenofnthenliabilitiesnisngreaternthannthencarryingna
mountn TaxablenTemporarynDifferences
40. Arisenwhennthencarryingnamountnofnthenliabilitiesnisngreaternthannthentax
nbasen DeductiblenTemporarynDifferences
41. Givenrisentondeferredntaxnliabiliti
esn TaxablenTemporarynDifferences
42. Calculatenthendeferredntaxnliabilityngivennthenfollowingnitemsnincurredninn2020nbynCompanynB.nB
onusesn arentaxndeductiblenonlyninnthenyearninnwhichntheynarenpaid.
$372
43. CompanynCo.nhasn1,000nemployeesnandnitndecidesntongrantneachnofnthenemployeesn200nshareno
ptionsn asnpartnofnitsnnewnrewardsnplan.nThenoptionsnarenexercisablenovern5nyearsnandnsubjectnonl
yntonthen conditionnthatnthencompany'snstocknpricenmustnbenatnleastn30%nhighernthannitsnoriginalni
ssuenprice.n CompanynCo.'snsharefibasednpaymentsnarensubjectnto:
Nonfivestingncondition
44. CompanynAnhasn800nemployees,nandnitndecidesntongrantneachnofnthenemployeesn50nsharenopti
onsnasn partnofnitsnnewnrewardsnplan.nThenoptionsnarenexercisablenovern5nyearsnandnsubjectntonan
3fiyearnservicen condition.nThenfairnvaluenofneachnoptionnatnthengrantndatenisn$16.nThencompanynes
timatesnthatn80%nofnitsn employeesnwillnmeetnthenservicenconditionnrequirednfornreceivingnthenopti
ons.nCalculatenthentotalnsharefin basednpaymentnexpensenfornCompanynAnassumingnthatn80%nofnth
enemployeesnactuallynmeetnthenservicen condition.
$512,000
45. Whichnofnthenfollowingnisnnotnanrequiredncriterionnfornantransactionntonbenconsiderednanb
usinessn combination?
Presencenofnoutputs
46. Whichnofnthenfollowingnstatementsnregardingnthenaccountingnfornbusinessncombinationsnisnfalse?
Goodwillnisnthendifferencenbetweennthenconsiderationntransferrednbynthenacquirerntonthenacquireenan
dnthen fairnvaluenofnidentifiablenassetsnacquired.
47. Debtnissuancencostsnare:
Amortizednovernthentermnofnthenrelatedndebtnliability
48. WhichnofnthenfollowingnisnNOTnanbestnpracticenfornfinancialnmodelnin
puts?n Protectninputsnbynlockingninputncells
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n
CFInGENERALnQUESTIONAnANDnANSWERSnFORnFMVAnCERTIFICATION
1. Whichnofnthenfollowingnitemsnarennotnincludednwhenndeterminingnincomenfromnoperati
ons?n Taxes
2. Whichnrationwouldnyounusentondeterminenthenprofitabilitynofnthengoodsnsoldnbynancom
pany?n Grossnprofitnmargin
00:43n01:44
3. Whennperformingnanverticalnanalysisnwhichnincomenstatementnitemndonyounusentondetermin
enthen costncontributionnforneachnexpensencategory?ntiWhatnisnthendenominator?)
Sales
4. Horizontalnanalysisnallowsnusntonanalyzenperformancenov
er:n Time
5. Whenncalculatingnthenquicknrationorn"acidntest"nwhichncurrentnassetnornliabilitynisnomi
tted?n Inventory
6. Fornwhichnorganizationnwouldnyounexpectntonseenthenhighestninventorynturnovernr
atio?n Grocerynretailer
7. Whatnactionsncouldnancompanyntakentonreducenitsnworkingncapitalnfundingn
gap?n Tightenncustomerncreditnterms
8. Thendebtntonequitynrationindicates:
Thenproportionnofnthencompanynfinancednbynlendersnversusnowners
9. Whichnofnthenfollowingnitemsnarennotnincludedninnworkingncapi
tal?n Shortntermninvestments
10. Whenncalculatingnturnovernofnpropertynplantn&nequipmentnandnreceivables,nwhichnitemnfro
mnthen incomenstatementndonwenuse?
Sales
11. Ifnancompanynwantedntonfinancenthenpurchasenofnequipmentnwithoutndilutingnshareholdersne
quity,n whichnofnthenfollowingnoperationncouldnitnconsider?
Obtainingnanloannfromnanbank
12. Workingncapitalnmovementnisnincludedninnwhichnsectionnofnthencashnflownstatem
ent?n Operatingnactivities
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n
00:03n01:44
13. Thendebtntontangiblennetnworthnrationisncalculatednasnfoll
ows:n InterestnBearingnLiabilitiesn/ntiEquitynfinIntangiblenAssets)
14. Ifnthentotalnassetsntonequitynrationofnancompanynisnincreasing,nitnisnpossiblenthat:
Thencompanynisnincreasingnthenusenofndebtnandngettingnhighernfinancialnleverage
15. Whichnrationisnnotnonenofnthenthreenratiosnthatnmultiplyntogetherntonproducenthenreturnnon
nequityn ratio?
Operatingnprofitnmargin
16. Whichnfinancialnleveragenrationisnusednwithntwonothernratiosntonmathematicallynproduc
enthen returnnonnequitynratio?
TotalnAssetsn/nEquity
17. Whichnofnthenfollowingnisnantertiarynrationthatndrivesnprofitabil
ity?n SG&AnExpensen/nSales
18. Whichnratiosnindicatenhownefficientlynthencompanyngeneratesnsalesnfromnitsnassets?
Workingncapitalnturnover
19. Thennetnprofitnmarginnrationcannmathematicallynbenbrokenndownnasn"TaxnimpactnxnC
apitaln structurenimpactnx..."
EBITn/nSales
20. BasednonnthenfollowingninformationnfromnABCnCompany'snfinancialnanalysis,nwhichnoneno
fnthen followingnstatementsnisnNOTntrue?
Thencompany'snabilityntoncovernitsnshortfitermnobligationsnisngettingnhighernovernthenfivenyears.
21. Whichnofnthenfollowingnbestndescribesnaccountingnprinciplesninngeneral?
Theynoutlinenthenfundamentalnrulesnandnconceptsnandnestablishnthenframeworknonnwhichndetailedn a
ccountingnstandardsnarenbased.
22. Ansoundnaccountingnframeworknallowsnfornallnofnthenfollowingnbenefitsnex
cept:n Identicalnitemsnbeingnreportednonnthenfinancialnstatementsnofndifferentn
companies
23. ConservatismnPrinciple
Itnprovidesnguidancenonnhowntonrecordntransactionsnwhenntherenisnuncertainty.
24. HistoricalnCostnPrinciple
Itnstatesnthatnassetsnandnliabilitiesnarenrecordednonnthenfinancialnstatementsnatnthencostnatnwhichnthe
ynweren acquirednornassumed.
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n
25. ObjectivitynPrinciple
Itnstatesnthatnfinancialnstatementsnmustnbenfreenfromnbiasnandnbasednonnverifiablenevidence.
26. EconomicnEntitynPrinciple
Itnstatesnthatntransactionsncarriednoutnbynanbusinessnarenseparatednfromnthosenconductednbynitsnowner.
27. MatchingnPrinciple
Itnstatesnthatnthenexpensesnofnanbusinessnshouldnbenrecordedninnthenperiodsninnwhichnthencorrespon
dingn revenuesnarenearned.
28. OnnMarchn1st,nMr.nSmithensignednupnfornanfitnessnprogramnatnFitnCo.nandnpaidn$960nfornth
enentiren programnupfront.nThenprogramnincludesnantotalnofn12nsessionsnandntwonsessionsnare
ndeliveredneachn month.nHownmuchnrevenuenfromnMr.nSmithenshouldnFitnCo.nrecognize natnthe
nendnofnMarch?
$160
29. Whichnofnthenfollowingncharacteristicsndoesnnotnenhancenthenusefulnessnofnfinancialninforma
tion?n Relevance
30. Identifynthenstatementnthatnisnmostnaccurate.
Financialninformationnthatnhasnconfirmatorynvaluenprovidesnfeedbacknthatneithernconfirmsnornchanges
n previousnevaluations.
31. Whichnofnthenfollowingnisnnotnancorrectndescriptionnofnhownannoperatingnleasenisnrecognizedn
onnthen financialnstatements?
Thenamortizationnexpensenofnthenrightfioffiusenassetnisncalculatednusingnthenstraightfilinendepreciation
n methodnovernthenleasenterm.
34. CompanynInc.nentersnintonan10fiyearnfinancenleasenatnthenbeginningnofn2021nfornantotalnofn$250
,000.n Thenannualnleasenpaymentnisn$25,000ntipayablenatnthenendnofneachnyear)nandnthenratenimplic
itninnthenleasen isn5%.nNoninitialndirectncostsnarenincurred.nHownmuchninterestnexpensenshouldnbenr
ecognizedninn2021?
$9,652
35. Whichnofnthenfollowingnstatementsnaboutnincomentaxesnisnnotncorrect?
Deductiblentemporaryndifferencesngivenrisentondeferredntaxnliabilities,nmeaningnthatnmorentaxnisnpaya
bleninn thenfuture.
36. Generallynarisenwhenntherenarendifferencesnthatnresultninncurrentnaccountingnincomenbeingngr
eatern thanntaxablenincome
TaxablenTemporaryn Differences
37. Givenrisentondeferredntaxnasse
tsn DeductiblenTemporarynDiffere
nces
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n
38. Generallynarisenwhennthentaxnbasenofnthenassetsnisngreaternthannthencarryingna
mountn DeductiblenTemporarynDifferences
39. Arisenwhennthentaxnbasenofnthenliabilitiesnisngreaternthannthencarryingna
mountn TaxablenTemporarynDifferences
40. Arisenwhennthencarryingnamountnofnthenliabilitiesnisngreaternthannthentax
nbasen DeductiblenTemporarynDifferences
41. Givenrisentondeferredntaxnliabiliti
esn TaxablenTemporarynDifferences
42. Calculatenthendeferredntaxnliabilityngivennthenfollowingnitemsnincurredninn2020nbynCompanynB.nB
onusesn arentaxndeductiblenonlyninnthenyearninnwhichntheynarenpaid.
$372
43. CompanynCo.nhasn1,000nemployeesnandnitndecidesntongrantneachnofnthenemployeesn200nshareno
ptionsn asnpartnofnitsnnewnrewardsnplan.nThenoptionsnarenexercisablenovern5nyearsnandnsubjectnonl
yntonthen conditionnthatnthencompany'snstocknpricenmustnbenatnleastn30%nhighernthannitsnoriginalni
ssuenprice.n CompanynCo.'snsharefibasednpaymentsnarensubjectnto:
Nonfivestingncondition
44. CompanynAnhasn800nemployees,nandnitndecidesntongrantneachnofnthenemployeesn50nsharenopti
onsnasn partnofnitsnnewnrewardsnplan.nThenoptionsnarenexercisablenovern5nyearsnandnsubjectntonan
3fiyearnservicen condition.nThenfairnvaluenofneachnoptionnatnthengrantndatenisn$16.nThencompanynes
timatesnthatn80%nofnitsn employeesnwillnmeetnthenservicenconditionnrequirednfornreceivingnthenopti
ons.nCalculatenthentotalnsharefin basednpaymentnexpensenfornCompanynAnassumingnthatn80%nofnth
enemployeesnactuallynmeetnthenservicen condition.
$512,000
45. Whichnofnthenfollowingnisnnotnanrequiredncriterionnfornantransactionntonbenconsiderednanb
usinessn combination?
Presencenofnoutputs
46. Whichnofnthenfollowingnstatementsnregardingnthenaccountingnfornbusinessncombinationsnisnfalse?
Goodwillnisnthendifferencenbetweennthenconsiderationntransferrednbynthenacquirerntonthenacquireenan
dnthen fairnvaluenofnidentifiablenassetsnacquired.
47. Debtnissuancencostsnare:
Amortizednovernthentermnofnthenrelatedndebtnliability
48. WhichnofnthenfollowingnisnNOTnanbestnpracticenfornfinancialnmodelnin
puts?n Protectninputsnbynlockingninputncells
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