Question 1

LST Company is a publicly traded company with $120 million in sales. Historically, LST does not extend credit to customers beyond net 45 terms. To help promote sale of a new product introduced into the market this year, LST offered financing terms to customers purchasing the new product. As a result, sales increased by 15% from the prior year and accounts receivable increased by 5%. At the end of their fiscal year LST had a $15 million sale to a new customer that was recorded as a note receivable. LST recognizes revenue when goods leave the facility. During the financial audit the auditors discovered that the customer did not receive the product until three days after the year-end. Under GAAP accounting, the auditors would MOST LIKELY render a(n):

Options :

A : adverse opinion because the product not received before the fiscal year-end.

B : qualified opinion because the product was not received before the fiscal year-end.

C : unqualified opinion because the product was shipped before the fiscal year-end.

D : disclaimed opinion because the product was shipped before the fiscal year-end.

Answer: C

Question 2

Evaluating the liquidity needs of an organization is a function of:

Options :

A : long-term investment yield forecasting

B : long-term cash flow forecasting.

C : short-term investment yield forecasting.

D : short-term cash flow forecasting.

Answer: D

Question 3

The mix of long-term debt and equity refers to a company’s:

Options :

A : financial leverage.

B : capital structure.

C : current ratio.

D : WACC

Answer: B

Question 4

The “agency problem” refers to:

Options :

A : management’s use of a fiduciary agent for stockholders.

B : a large and active institutional investor base acting on behalf of individual investors.

C : stockholders who allow management to take actions that will benefit management.

D : the internal audit function reporting to the audit committee of the board instead of to management.

Answer: C

Question 5

If a bank has a 10% reserve requirement, a 31-day month, and an earnings credit rate of 6.5%, which of the following is the approximate level of collected balances required to support $1.00 worth of bank service charges?

Options :

A : $181

B : $199

C : $201

D : $206

Answer: C

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