QUESTION: 1689

A firm has preferred equity outstanding but has not declared payment of dividend on it. If the firm's net income is 1000 and there are 100 common shares outstanding, the firm's Basic EPS is ________.

equal to 10
insufficient information
less than 10
more than 10

Answer(s): C

Explanation:

Even when preferred dividends have not been declared, they must be subtracted from net income while calculating Basic EPS since no dividends can be paid on common share unless the preferred dividends are paid. Basic EPS includes only the amount that is available for distribution on common shares.

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QUESTION: 1690

In a period of falling prices, the inventory method that gives the lowest possible value for ending inventory is:

gross profit
FIFO
LIFO
weighted average

Answer(s): B

Explanation:

The first-in-first-out (FIFO) method is based on the assumption that the costs of the first items acquired should be assigned to the first items sold, therefore ending inventory on hand is based on the most recent prices.

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QUESTION: 1691

According to SFAS 95, cash and cash equivalents includes

bank accounts, U.S. Treasury Bills and fixed income securities.
risk-free assets with original maturities of 90 days or less.
risk-free assets with original maturities of 30 days or less.
bank accounts, U.S. Treasury Bills and marketable securities.
only bank accounts.

Answer(s): B

Explanation:

Bank accounts, U.S. Treasury Bills, and similar assets qualify.

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QUESTION: 1692

The following is true about the price earnings ratio

it is the ratio between the company's current market value and its earnings per share
none of these answers
the ratio is calculated based on the earnings per share from the past year
stocks with price earnings ratios of 25 or less are considered to be underpriced

Answer(s): A

Explanation:

PE ratio is calculated based on expected earnings per share and a ratio of less than 5 to 8 makes a stock appear underpriced.

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QUESTION: 1689

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QUESTION: 1690

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QUESTION: 1691

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QUESTION: 1692

Explanation: