ACCT 370 Read & Interact Revsine, Collins, Johnson, Mittelstaedt, & Soffer Chapter 7 solution answer

ACCT 370 Read & Interact Revsine, Collins, Johnson, Mittelstaedt, & Soffer Chapter 7 solutions complete answers

 

Earnings expected to persist into the future are called

 

Estimating the worth, or intrinsic value, of a company is called    .

 

The fundamental approach to business valuation uses

 

            assessment plays a central role in measuring a company's credit risk.

 

Rank the steps involved in valuing a company

 

True or false: The discounted cash flow valuation approach expresses what a stock is worth as the future value of present cash flows.

 

A company's operating cash flow and its free cash flow

 

An approach that uses basic accounting measures to assess a company's worth is known as the

 

The forecasted cash flow stream to be discounted after subtracting payments to debt holders and preferred shareholders is called the

 

Cash flow assessment plays a central role in measuring a company's            .

 

The FASB believes that current earnings outperform current cash flows in predicting future cash flow and that belief stems from the forward-looking nature of            .

 

Value-relevant attributes used in forecasting future amounts for a business valuation include

 

The FASB believes that __________ provide a much better measure of long-run expected operating performance than do current cash flows.

 

The two ways to implement the discounted cash flow valuation approach include

 

If a company's equity cost of capital is 8% and they report current earnings of $6 per share, this implies a share price of

 

Which of the following are reasons that the free cash flow model differs from cash flow from operations under GAAP?

 

If a company has an earnings rate equal to the underlying book value of net assets,

 

The flows to equity model

 

Assume the following for the Morgan Goldman firm: Actual earnings of $14,000, beginning book value of $250,000, and cost of capital of 8%. What are their abnormal earnings?

 

The FASB argues that analyzing a firms'______ improves their ability to forecast future cash flows.

 

A firm can use which of the following to evaluate their prospects of generating abnormal earnings?

 

Research indicates that

 

If there is no active market for an asset, fair value could be determined by

 

A measure of the relation between a firm's current earnings and its intrinsic share value is its      /      ratio.

 

True or false: Level 2 of the GAAP hierarchy of approaches used to measure fair value uses unobservable inputs such as management's estimates of expected future cash flows.

 

True or false: The abnormal earnings approach and the free cash flow approach always produce the same valuation estimate.

 

True or false: Different levels of risk or uncertainty associated with earnings can cause the share price for firms with the same level of current and future expected earnings to sell at different prices.

 

Assume the following for the Howard Saks firm: Actual earnings of $28,000, beginning book value of $250,000, ending book value of $350,000, and cost of capital of 6%. What are their abnormal earnings?

 

Most firms' P/E ratios range between

 

Companies with shares that sell for a premium relative to their book value are companies with

 

Earnings that are unrelated to future free cash flows and, therefore, not pertinent to assessing current share price are called      -      earnings.

 

The amount a firm would receive if it sold its investment is called

 

Income or loss from discontinued operations are known as

 

Match the level of the hierarchy for measuring fair values on the left with its description on the right.

 

Becker Corporation has the following components in its multi-step income statement: Reported EPS $15, Permanent component 60%, (earnings multiplier of 5), Transitory component 25%, (earnings multiplier of 1), and value-irrelevant component 15%, (earnings multiplier of 0). What is Becker's implied total earnings multiple?

 

Riskier firms have a higher risk-adjusted cost of capital which means that the discount rate for capitalizing their earnings will be

 

Which of the following items is an example of sustainable earnings?

 

A firm's potential earnings from reinvesting current earnings in new projects that will eventually earn a rate of return in excess of the cost of equity capital are called            .

 

An earnings surprise

 

Earnings that are not expected to persist into the future are called

 

Seasonal lines of credit and special purpose loans are common types of

 

Income from continuing operations, excluding special items, is known as

 

Which of the following are true of long-term loans?

 

The divergence of a firm's publicly reported profit from its true operating earnings is known as       of      .

 

            are considered a variation on a seasonal credit lines.

 

High quality earnings are ______ earnings.

 

            includes short-term notes sold directly to investors by large and financially sound companies.

 

Earnings that deviate from investors' expectations are referred to as a(n)            .

 

Long-term forms of public debt financing include

 

Which of the following are true about short-term loans?

 

A qualitative assessment of the business, its customers and suppliers, and management character and capability is known as            .

 

Term lending agreements are ______ and have maturities of more than one year.

 

One way that investors assess credit risk is to rely on the opinion of a      -      agency.

 

The interest rate on a revolving loan

 

Match the Standard & Poor's credit rating on the left with its credit quality on the right.

 

Which of the following are true of commercial paper?

 

Which of the following are true regarding the financial statement ratios that credit analysts at Standard & Poor's track?

 

An unsecured debt, meaning no specific pledge of property is made, is called a       bond.

 

Identify the proper order of the six steps involved in preparing comprehensive financial statement forecasts.

 

Before approving a loan to a company, a commercial loan officer evaluates the borrower's ability to repay the proposed loan at maturity. This evaluation typically involves

 

Which of the following assess and grade the creditworthiness of companies and public entities that sell debt to investors?

 

            measure the percentage of borrowers that failed to make all promised debt payments based on the credit rating initially assigned.

 

Match the ratio used for credit analysis on the left with its measurement on the right.

 

Preparing comprehensive financial statement forecasts involve several steps. Which of the following is not one of these steps?

 

The amount a firm would pay if it bought an identical investment is called

 

Becker Corporation has the following components in its multi-step income statement: Reported EPS $15, Permanent component 60%, (earnings multiplier of 5), Transitory component 25%, (earnings multiplier of 1), and value-irrelevant component 15%, (earnings multiplier of 0). What is Becker's implied share price?

 

The first step in credit analysis is

 

Using the abnormal earnings approach, investors will pay a premium for those firms that