ADMS 3330 Study Guide - Abnormal Return, Heavy Crude Oil

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tanwalrus32

16 Jun 2014

School

York University

Department

Administrative Studies

Course

ADMS 3330

Professor

Douglas Kong

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Document Summary

Market model = r = a + br + e, where (a + br) is the beginning-of-period expected return and e is abnormal return. Thus, e = r (a + br) E(r) = (a + br) = r(1-b) + br = 0. 0002(1 0. 65) + 0. 65(0. 006) = 0. 00007 + 0. 0039 = 0. 00397. R = change in share price / opening share price = (-1. 25) / (37. 35+1. 25) = - 0. 03238. In addition, the expected the globe and mail reported about anticipated discount on heavy crude oil, imperial. Oil"s niche, and on the decline in the production from oil sands projects.

Related Questions

8. Which of the following would require a higher return under a risk-adjusted return on capital (RAROC) approach to capital allocation?

a)traditional commercial lending activities

b)government securities

c) home mortgages

d) 2 and 3.

9. Trend analysis often involves

a) comparison of past firm performance to current industry performance

b)averaging past years' performance to remove the effects of accounting changes

c) graphically portraying performance measures over time

d) all of the above

e) 1 and 3

10. Transaction risk is the risk of a loss _______ and translation risk is the risk of a loss _______

a) in the value of a firmâs equity with assets denominated in one currency and liabilities in another; with changes in exchange rates for foreign transactions

b) with changes in exchange rates for foreign transactions; in the value of a firmâs equity with assets denominated in one currency and liabilities in another

c) in the value of a firmâs assets with equity denominated in one currency and liabilities in another; with changes in exchange rates for foreign transactions

d) none of the above

11. The special-purpose vehicle (SPV)

a) allows sales accounting treatment of under generally accepted accounting principles (GAAP)

b) usually reduces the credit rating of the structured securitization

c) monitors reports by the loan servicer on the pool performance

d) all of the above

12. The major financing source for a bank comes from

a) loans

b) deposits

c) equity

d) none of the above

13. The provision for loan losses would likely be

a) increased during economic downturns

b) decreased during economic downturns

c) increased during an economic expansion

d) none of the above

e) 2 and 3

14. The Internet

a) may allow banks to cross-sell products, reduce transaction costs, and improve market presence, service, and quality provided to customers

b) may make customers more loyal to the bank by increasing the convenience and access to a broad variety of services, thereby reducing the probability of customersâ switching institutions

c) has increased costs for financial institutions due to lack of economies of scale

d) 1 and 2

15. Pillar 2 of Basel II

a) includes capital charges for credit risk on a case-by-case basis

b) is mutually enforced by Pillars 1 and 3

c) provides for supervisory review of banks internal assessments of capital allocation and adequacy

d) all of the above

e) 2 and 3

16. Types of loan sales include

a) the novation, which transfers all rights and obligations of the selling bank to the buyer

b) the assignment, which gives the buyer the right to take action against the borrower if payments are not made

c) the participation, in which the bank continues to service the loan

d) all of the above

17. The difference between the book value of capital and the market value of capital for the same institution is influenced by

a) changes in interest rates

b) changes in reserve requirements

c) changes in historic asset costs

d) none of the above

e) all of the above

18. Financial institutions are required to maintain liquid assets for the purpose(s) of

a) meeting repayment obligations to customers holding maturing liabilities

b) meeting repayment obligations to customers holding maturing liabilities. meeting regulatory requirements for reserves

c) meeting the dividend payment requirements of outstanding common stock

d) all of the above

e) 1 and 2

19. The process of securitization typically involves

a) removing loans from a bank's balance sheet and selling them to investors

b) bank origination of loans.

c) an insurance company surety bond or a bank letter of credit

d) all of the above

20. Generally, as the maturity of an asset or liability rises it has a higher risk premium due to greater maturity risk and greater

a) default risk

b) default risk

c) liquidity risk

d) all of the above

e) 2 and 3

Read the 2015 annual report of Air France â KLM and answer the 20 questions asked regarding the accounting issues. Link is provided below:

http://www.airfranceklm.com/sites/default/files/publications/afkl_registration_doc_2015.pdf

1. Air France-KLM reports âConsolidated statement of recognized income and expensesâ for the year ended December 31, 2015. If this statement was a U.S. GAAP statement, what would be the title of this statement?

a. Consolidated statement of total net income

b. Consolidated statement of other comprehensive income

c. Consolidated statement of comprehensive income

d. Consolidated statement of recognized net income

2. What method does Air France-KLM use for the Statement of Cash Flows?

a. Indirect method

b. Direct method

c. Gross method

d. Net method

3. The basic and diluted earnings per share for the year ended December 31, 2015, indicates that Air France-KLM has:

a. no convertible debts.

b. some dilutive securities.

c. no preferred stocks.

d. some treasury stocks.

4. What method is used to account for investments in companies over which Air France-KLM can âexercise significant influence on financial and operating policy decisions?â

a. Cost method

b. Liability method

c. Equity method

d. Fair value method

5. Sale of passenger tickets is accounted for at the time of ticket sale as:

a. Sales revenue

b. Deferred revenue

c. Contingent asset

d. No recognition

6. How does Air France account for business combination costs other than those related to the issuance of debt or equity securities?

a. Expensed as incurred

b. Capitalized as incurred

c. Included in goodwill

d. Used to offset fair value of the acquisition

7. Which of the following is not an âaccumulated other comprehensive incomeâ item among those reported in the âreserves and retained earningsâ in the 2015 consolidated balance sheet of Air France-KLM?

a. Available for sale securities reserves.

b. Derivatives reserves.

c. Legal reserves.

d. Pension defined benefits reserves.

8. What is the carrying amount of investments in debt and equity securities that are classified as available-for-sale?

a. Fair value Cost

b. Amortized cost

c. Lower of cost or market

9. Inventories are carried at:

a. The lower of the first-in-first-out cost or net realizable value.

b. The first-in-first-out cost.

c. The lower of the weighted-average cost or net realizable value.

d. The weighted-average cost.

10. Air France-KLM classifies its frequent flyer programs as:

a. Noncurrent liability

b. Current liability

c. Current asset

d. Other debt

11. The followings are included in Air France-KLMâs intangible assets, except for:

a. Trademarks

b. Leased aircraft

c. Customer relationships

d. Slots for takeoff and landing

12. Air France-KLM reports bank overdrafts as:

a. A contra account to cash and cash equivalents.

b. A current liability.

c. An expense.

d. A bank deposits in transit.

13. Which method does Air France-KLM use to record depreciation expense for its flight equipment?

a. The activity-based method.

b. The sum-of-yearsâ-digit method.

c. The straight-line method.

d. The group method.

14. Which accounting standards does Air France-KLM use?

a. U.S. GAAP

b. French GAAP

c. Netherlands GAAP

d. International Financial Reporting Standards

15. As of December 31, 2015, what assets are held for sale?

a. Land

b. Aircraft

c. Equipment

d. Buildings

16. Which of the following is included in âincome from operating activitiesâ but not in âincome from current operations?

a. Sale of aircraft equipment

b. Research and development costs

c. Bad debt expense

d. Interest revenue

17. Which of the following is not true about accounting treatment for the overhaul cost of major airframe and engine?

a. The cost is treated as separate asset component.

b. The cost is capitalized.

c. The cost is depreciated over the remaining useful life.

d. The cost is expensed as incurred.

18. How are financial assets accounted for if the Air France-KLM intends to sell them in the near future to realize capital gains?

a. At fair value with fair value changes recognized in the current period profit and loss

b. At fair value with fair value changes recognized as other comprehensive income

c. At cost with no recognition of fair value changes

d. At amortized cost with no recognition of fair value changes

19. Which of the following is not true about impairment test?

a. Tangible fixed assets, intangible assets, goodwill, and other assets with indefinite useful life are subject to an impairment test.

b. The impairment test is done at least once a year.

c. Recoverable value is the lower of the net realizable value and value in use.

d. The value in use is determined according to the discounted future cash flow method.

20. Which of the following is not an âother non-current income and expensesâ item?

a. Restructuring costs

b. Gains and losses on disposal of shares available for sale

c. Gains and losses on disposal of subsidiaries and affiliates

d. Gains and losses on sale of trading securities

1.Pension benefits represent deferredcompensation for current service.

A) True
B) False

2.Pension costs are recognized on an accrualbasis over the years employees earn pension benefits.

A) True
B) False

3.Almost all new pension plans pay definedbenefits.

A) True
B) False

4.Defined contribution plans require employersto make fixed payments to but not from a pension fund.

A) True
B) False

5.Defined contribution retirement benefits paidto retired employees dependend on how well the pension planactaully performs.

A) True
B) False

6.In chapter 17, our text's authors seem tosuggest that actual results rarely differ from actuarialestimates.

A) True
B) False

7.US GAAP requires that corporations reportboth pension plan assets and liabilities on their balancesheets.

A) True
B) False

8.Our text indicates that actuarial estimatesof projected benefits may be more reliable than actuartialestimates of accumulated benefits.

A) True
B) False

9. In Illustraton 17-6A on page 1005,retirement benefits have been discounted at 6%.

A) True
B) False

Retroactive changes to the way pension benefits are determeinedcan result in prior service costs.

A) True
B) False

11.

When calculating the present value of retirement benefits, lowerdiscount rates reduce PBO estimates.

A) True
B) False

12.

Retriement benefits paid to employees always reduce projectedbenefit obligations.

A) True
B) False

13. In chapter 17, our authors suggest thattoday, it's very unusual for pension plans to be underfunded.

A) True
B) False

14. A company's PBO is reported as a separatelibilitiy on its balance sheet.

A) True
B) False

15. Pension expense calculatons are made usingexpected returns on plan assets.

A) True
B) False

16. Prior service costs are amortized overtime, not immediately expensed when incurred.

A) True
B) False

17. Gains or losses arise whenever the PBO orreturn on plan assets turn out to be different than expected.

A) True
B) False

18. Amortizing net gains would will makepension expense calculations grow larger.

A) True
B) False

19. Amortized gains and losses are reclassifiedfrom OIC to net income.

A) True
B) False

20. Service and interest costs increase PBOcalculation.

A) True
B) False

21. Under International Financial ReportingStandards (IFRS) OCI gains and losses are not amortized butaccumulate.

A) True
B) False

22. Given an actual return on plan assets of$30 and a gain on plan assets of $3, expected return on plan assetswould be $27.

A) True
B) False

23. Given a beginning PBO of $400 and adiscount rate of 6%, interest cost would be $24.

A) True
B) False

24. Analysis of exercise 17-8 on page 1043indicates Sterling Properties earned a $9,000 gain on plan assetsin 2016.

A) True
B) False

25. The actual return on plan assets Abbot andAbbot earned in exercise 17-10 was less than their expectedreturn.

A) True
B) False

26. Fahy Transportation's pension expense wouldinclude an interest cost of $51.1 million in exercise 17-7.

A) True
B) False

27. In CPA Exam Question 1 on page 1050, WolfInc. would report a net pension liability of $85,000 on its balancesheet.

A) True
B) False

28. The correct answer to CPA Exam Question 8on page 1051 is letter c.

A) True
B) False

29. Analysis of Judgment Case 17-3 on page 1061indicates LDG Consulting's pension is overfunded by $405,000 at theend of 2016.

A) True
B) False

30. After studying chapter 17, it would bereasonable to conclude athat GM would account for its pension planamendment in Real World Case 17-9 on page 1063 as a prior servicecost.

A) True
B) False0

ADMS 3330 Study Guide - Abnormal Return, Heavy Crude Oil

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