FINMA 2 CHAPTERS 7-14

What is the general principle of accounting for common equity issues?

• a) Recording at historical cost

• b) Recording at present value

• c) Recording at fair value

• d) Recording at adjusted historical cost value

What are dividends?

• a) Payments made by shareholders to the company

• b) Payments made by the company to its shareholders

• c) Investments made by the company in other businesses

• d) Rewards given to employees

It is a type of stock where the shareholders usually have voting rights in company decisions. Dividends here also fluctuate

• Preferred Stock

• Income Stock

• Dividend Stock

• Common Stock

The companies conduct share repurchase due to the following reasons except:

• a) To increase the voting power of existing shareholders.

• b) To manage the finance of the company

• c) To protect how much voting power each share has

• d) To have enough stock available for employee stock options

Which of the following is not a classification of a derivatives?

• a) Cash Flow Hedges

• b) Speculative Investments

• c) Hedge Interest Rate Risk

• d) Fair Value Hedges

When lessor bears most of the risk, the lease is an operating lease. When the lessee bears most of the risk, the lease is a capital lease

• True, True

• False, True

• True, False

• False, False

"Firms must disclose the ______ value and the _____ value of financial instruments."

• fair, book

• present, fair

• fair, present

• book, fair

In converting operating leases to capital leases, you must eliminate the following except:

• Utility Expense

• Rent Expense

• Interest Expense

• Depreciation Expense

Which of the following statements is the benefit of the lease?

• a) Ability to not shift the tax benefits from depreciation and other deductions

• b) Ability to finance the acquisition of an asset

• c) Ability to increase the risk of technological obsolescence

• d) None of the choices

Which among the following is not an element of a derivatives?

• a) A derivative has an underlying

• b) A derivative has a notional amount

• c) A derivative may require an initial investment

• d) Derivatives typically require, or permit, net settlement