Free CFA-Level-I Exam Braindumps (page: 454)

Page 454 of 991

Which of the following best describes a statement of shareholders equity?

  1. A statement of shareholders equity measures a company's financial performance over a specified period of time.
  2. A statement of shareholders equity details the cash inflows and outflows that are related to a company's operating, investing, and financing activities over a period of time.
  3. None of these answers.
  4. A statement of shareholders equity reports changes over a period of time in component accounts that comprise the ownership of a firm.
  5. A statement of shareholders equity summarizes the financial position of a company at a given point in time.

Answer(s): D

Explanation:

The statement of shareholders equity reports changes in component accounts that comprising equity of a firm.
This statement is useful in identifying reasons for changes in shareholders' claims on the assets of a company.



New Gestalt, Inc., a software firm had a net income of 1.7 million last year. It has 200,000 common shares and 300,000 convertible bonds with face value of 100 outstanding. The convertible bonds carry a coupon of 4% and can be converted one-for-one. The average stock price last year was 39 and the maximum price was 57. The effective interest rate on the convertible debt is 8%. New Gestalt issued 100,000 preferred shares with face value 100 and a coupon of 5% on March 31st of last year. Assume the convertible bonds are dilutive and that New Gestalt faces a 30% tax rate. The number of shares used in Basic EPS equals ________.

  1. 600,000
  2. 575,000
  3. 500,000
  4. 200,000

Answer(s): D

Explanation:

Basic EPS considers only the weighted number of common stock outstanding. Therefore, number of shares used in Basic EPS = 200,000.



According to GAAP classification of cash flows, all of the following are financing cash flows except:

  1. share repurchase.
  2. interest paid on new debt.
  3. losses on debt retirement.
  4. dividends paid out.

Answer(s): B

Explanation:

Interest payments and receipts are classified as operating cash flows.



When the weighted average method is used, ending inventory units are priced at the:

  1. average price
  2. none of these answers
  3. lower of cost or market
  4. earliest price

Answer(s): A

Explanation:

Under the weighted average method, inventory is priced at the average cost of the goods available for sale (Beginning inventory plus purchases during the period).



Page 454 of 991



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