FIN 3321 Midterm: Exam1-Fall2016-Proofed -Fin 3321
FSA 3321 – Fall (2016) Exam 1 Moore
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First Examination – Finance 3321
Fall 2016 ( Moore)
Class Time: ____________________ Printed Name: ____________________
Ethical conduct is an important component of any profession. The Texas Tech University Code
of Student Conduct is in force during this exam. Students providing or accepting unauthorized
assistance will be assigned a score of zero (0) for this piece of assessment. Using
unauthorized materials during the exam will result in the same penalty. Ours’ should be a self-
monitoring profession. I t is the obligation of all students to report violations of the honor code
in this course. By signing below, you are acknowledging that you have read the above
statement and agree to abide by the stipulated terms.
Student’s Signature: ______________________________
Clearly Circle the BEST response for each of the following questions: (3 points each for 1-22)
1. Which type of intermediary focuses on assessing the degree to which firms’ financial
reports are in conformance with mandated disclosure standards?
a. I nformation I ntermediary
b. Auditors
c. Financial Analysts
d. Bond Raters
e. Financial Press and Media
2. Competitive Positioning is part of which main element in Figure 1-2?
a. Business Environment
b. Business Strategy
c. Capital Markets
d. Accounting Environment
e. Accounting Strategy
3. Which is the first step in a structured equity security analysis and valuation?
a. Prospective Analysis
b. Accounting Analysis
c. Financial Analysis
d. Business Strategy Analysis
e. I mplementing Valuation Models
4. Which of the following is not one of the 5 main dimensions of the “Five-Forces” model?
a. Switching Costs
b. Rivalry Among Existing Firms
c. Threat of New Entrants
d. Bargaining Power of Customers
e. Threat of Substitute Products
FSA 3321 – Fall (2016) Exam 1 Moore
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5. One of the main reasons that firms are allowed flexible financial accounting standards
under GAAP is:
a. I t provides firms a better opportunity to report the underlying economic substance of
transactions and events.
b. I t gives the firms the opportunity to reduce the volatility of earnings so that investors
can provide better forecasts of future performance.
c. I t allows managers to better tie earnings to performance for compensation purposes.
d. I t gives firms the opportunity to mark-to-market the physical assets so that balance
sheet values are more relevant to decision makers.
e. None of the above.
6. Which one of the following would be recognized as an adjustment to comprehensive
income?
a. Recognition of I nventory write-downs
b. Recognition of Goodwill Impairment
c. Recognition of Extraordinary items such as losses from hurricane damages
d. Recognition of gains or losses to the market value of financial assets still owned by the
firm
e. Recognition of profits of losses from foreign operations of the firm
7. Which of the following line items is reported latest (tow ards the end) in the income
statement?
a. Extraordinary Expenses
b. Comprehensive Income
c. Goodwill impairment charges
d. I ncome from Continuing Operations
e. Gross Profit
8. Identify the proper sequence in which following items would be presented on the income
statement is:
1. Net Revenue
2. Gross Profit
3. Comprehensive Income
4. I ncome from Continuing Operations
5. Operating Income
a. 1, 2, 3, 4, 5
b. 1, 5, 2, 4, 3
c. 1, 2, 5, 4, 3
d. 1, 5, 3, 2, 4
e. 1, 2, 3, 5, 4
FSA 3321 – Fall (2016) Exam 1 Moore
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9. Which of the following statements is correct?
a. The FASB has the legal authority to proscribe GAAP.
b. Transparent financial reporting practices allow users to get a true and fair picture of the
firm.
c. Conservatism of financial reporting standards never reduces valuation relevance.
d. The external auditor certifies the financial statements are correct.
10. An industry having a high degree of price competition would be characterized by:
a. Low Industry Concentration, Few Legal Barriers to Entry, Low Product Differentiation
b. Few Exit Barriers, High First mover advantage, Low Product Differentiation
c. Low I ndustry Concentration, Steep Learning Curves, Low Firm Excess Capacity
d. Low Concentration, Low Fixed-Variable Cost Ratio, Few Legal Barriers to Entry
e. Supply > Demand, Low First Mover Advantage, Low Fixed to Variable Cost Ratio
11. Which of the following would lead to the low est degree of industry price competition?
a. Low I ndustry Concentration, Low Legal Barriers to Entry, Low Product Differentiation
b. Few Barriers to Entry, High First Mover Advantage, High Product Differentiation
c. Low Industry Concentration, Low Distribution Access, Low Customer Switching Costs
d. High Industry Concentration, High Fixed-Variable Cost Ratio, Hi product differentiation
e. Supply < Demand, Many Legal Barriers to Entry, Steep Industry Learning Curves
12. Assume a company has been classified as belonging in a purely differentiated product
(specialty good) industry. Which one of the following disclosures w ould not be considered
a key accounting policy?
a. Net Sales/Warranty Liabilities
b. I nventory is measured on a Lifo basis at lower of cost or market
c. Disclosure regarding new product development R&D expenses
d. Disclosure new customer service programs
e. Disclosure regarding the strategic placement of new distribution centers
13. Which of the following strategies would lead to a mixture of cost leadership and product
differentiation?
a. Economies of scale and scope, simpler product design, Lower input costs
b. Superior product variety, more flexible delivery, High Brand Advertising
c. Lower input costs, Low-cost Distribution, Low investment in R&D
d. High investment in brand image, High investment in R&D, Low Cost Distribution
e. Complex product designs, Superior Product Quality, Superior customer service
14. A driver’s ability to avoid purchasing gasoline at the expensive gas stations by conveniently
purchasing at a cheaper station is example of:
a. Bargaining power of firm over suppliers
b. Bargaining power of supplier over firm
c. Bargaining power of customers over firm
d. Bargaining power of firm over customers
e. None of the above
Document Summary
Ethical conduct is an important component of any profession. The texas tech university code of student conduct is in force during this exam. Students providing or accepting unauthorized assistance will be assigned a score of zero (0) for this piece of assessment. Using unauthorized materials during the exam will result in the same penalty. I t is the obligation of all students to report violations of the honor code in this course. By signing below, you are acknowledging that you have read the above statement and agree to abide by the stipulated terms. Clearly circle the best response for each of the following questions: (3 points each for 1-22: which type of intermediary focuses on assessing the degree to which firms" financial. Questions 15- 17 ( operating and capital lease adjustments: use the follow ing information for questions 15- 17. Abc company is a startup company in an industry that exclusively uses capital leases for its expensive medical testing equipment.
