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Question 4 QE3-O1-Users' valuation: MD&A includes manager's forecasts for firm's future.

Question 4
QE3-O1-Users' valuation:
MD&A includes manager's forecasts for firm's future. Specially the forecasts can help to estimate future cash flows or future earnings that can be generated by firm. Which decision model can get more benefit from the forecasts?
Answer
a. CAPM
b. Residual Earnings model (earnings capitalization model)
c. equally beneficial

Question 5
Q20-O3-Equity investment:
Which one is not a correct practice under the current GAAP for investments in equity securities?
Answer
a. When a firm has 15% of the ownership and the fair value is not available, the firm should use the equity method.
b. When a firm has 55% of the ownership, the firm should use the consolidation.
c. Although a firm has less than 50% of the ownership, if the firm acutally control the business operation of the target firm, the firm should use the consolidation.
d. When a firm has 35% of the ownership, the firm should use the equity method.

Question 6
Q14-O4-M&A:
For the M&A. what accounting method should be used?
Answer
a. Pooling of interest
b. Either Purchase method or Pooling of interest
c. purchase method based on fair market value
d. Equity method and minority interest

Question 7
Pro Forma:
Which one is not correct for Pro forma earnings?
Answer
a. Pro Forma earnings are voluntarily disclosed by firm
b. Pro Forma earnings are based on the current GAAP
c. Company does not need to disclose for how to calculate the Pro Forma earnings
d. Pro Forma earnings are used in valuation by investors.

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Question 4
QE3-O1-Users' valuation:
MD&A includes manager's forecasts for firm's future. Specially the forecasts can help to estimate future cash flows or
future earnings that can be generated...

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