1) Analysts combine information about the company’s current earnings, its business
strategy, and the industry’s competitive dynamics to forecast future free cash flows.
2) Lenders are willing to restructure a customer’s loan to help the customer resolve
present financial difficulties and stay in business and also because lenders often receive
more through restructuring than they would get from foreclosure.
3) The balance sheet is an expression of the accounting equation.
4) A mispriced security is a stock or bond that is selling for substantially moreor
lessthan it seems to be worth.
5) The gross profit earned by the lessor is the same whether the residual value is
guaranteed or unguaranteed.
6) According to current GAAP, convertible bonds must be recorded at the value of debt
only, with no value assigned to the conversion feature.
7) Financial statement information can help customers monitor a supplier’s
manufacturing processes and thus evaluate the quality of its products.
8) When a company has no convertible securities and no stock options or warrants
outstanding, the company has a simple capital structure.
9) Credit risk analysis uses financial ratios that focus on an assessment of liquidity and
solvency.
10) Securitization occurs when receivables are bundled together and sold or transferred
to another organization that issues securities which are not collateralized by the
transferred receivables.
11) Service cost and interest cost cause reported pension expense to increase for defined
benefit plans.
12) Most of the factors used to determine specific expense accruals for defined benefit
pension plans are based upon actuarial assumptions and present values.
13) EBI refers to the company’s earnings before interest.
14) According to U.S. GAAP, cash flows for interest resulting from a long-term
investment in bonds should be reported in the investing activities section of the
statement of cash flows.
15) The price charged for the privilege of delaying payment on a liability is interest.