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1) Generally accepted accounting principles and the Internal Revenue Code of tax law
require that the same depreciation method be used for both the financial statements and
the federal tax return.
2) The financial literature and valuation books strongly support the use of multiperiod
discounted valuation model either in terms of earnings or cash flow.
3) Equity capital to total assets for a bank is a measure of leverage.
4) Absolute figures and ratios are close to being meaningless unless compared to
another figure.
5) Significant weight is seldom given to the cash ratio unless the firm is in financial
trouble.
6) The acquisition of land using notes payable is an example of a noncash transaction.
7) For consolidating, the FASB recognizes risks, rewards, decision-making ability and
the primary beneficiary.
8) The proxy is the solicitation sent to stockholders for the election of directors and for
the approval of other corporation actions.
9) Interest margin is the spread between interest income and net income for a bank.
10) For public companies reporting to the SEC, the 10-K, 10-Q, 8-K, and proxy can be
found at http://www.sec.gov.
11) The budget for a state or local government is merely a plan of future revenues and
expenses.
12) A good times interest earned record would be indicated by a relatively high, stable
coverage for the times interest earned coverage.
13) The loan loss coverage ratio for a bank helps determine the asset quality.
14) The time period assumption indicates that the entity will remain in business for an
indefinite period time.
15) If an employee is in the pension plan, rights under this plan will be lost if the
employee leaves the firm prior to receiving a vested interest.
