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Multiple Choice Quiz
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1
A clause in a loan agreement that is intended to keep the borrower's financial position at the same level it was when the loan was made is called a
A)Guarantee.
B)Indenture.
C)Collateral.
D)Loan covenant.
2
Sales of capital stock and large debt financing transactions are usually authorized by
A)The transfer agent.
B)The shareholders.
C)The board of directors.
D)Management.
3
Company bonds and stocks are normally handled by an intermediary called a
A)Registrar
B)Transfer agent
C)Broker
D)Trustee
4
Controls over making estimates include all of the following except
A)Management communication of the need for proper accounting estimates.
B)Comparison of prior estimates with subsequent results.
C)Consideration of whether estimates are consistent with the company's operational plans.
D)Ensuring the effects of the estimate are in line with analysts forecasts.
5
Inspecting marketable securities provides primary evidence about the ASB balance assertion of
A)Existence.
B)Rights and obligations.
C)Valuation.
D)All of the above.
6
Hedging refers to
A)Calculating goodwill impairment.
B)Using derivatives for market speculation.
C)Using derivatives to protect companies from market uncertainties.
D)Management not giving direct answers in their representations.
7
If market prices are not readily available for fair value measurements, management should use
A)Auditors' best estimates.
B)Historical cost.
C)Their own assumptions as long as there are no contrary data.
D)The previous year's value
8
Goodwill impairment refers to
A)Loss of trust from customers.
B)The amount of amortization.
C)A permanent decline in value of recorded goodwill.
D)A need for increased professional skepticism.
9
Estimates in the finance and investment cycle include
A)Probability of a correlated hedge.
B)Classification of equity investments.
C)Actuarial assumptions for pension costs.
D)All of the above.
10
Financial planning usually starts with the
A)Capital budget.
B)Cash flow forecast.
C)Authorization of stock sale or debt financing.
D)None of the above.





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