What is the capital gain yield, and how is it calculated for a security over a given holding period? The effective annual rate of return on an investment. The percentage change in the price of a security over a given holding period. The elasticity of returns with respect to market changes. The dividend yield of a stock.

The percentage change in the price of a security over a given holding period.

What is the compound annual growth rate (CAGR), and how does it relate to historical returns? The arithmetic average of returns over time. The geometric average historical return is also called this. The real return adjusted for inflation. Blume's formula for adjusting returns.

The geometric average historical return is also called this.

What is systematic risk, and how does it affect a large number of assets? Beta, a measure of an asset's volatility relative to the market. Diversifiable risk that can be eliminated through diversification. Risk that affects a large number of assets, each to a greater or lesser degree. Idiosyncratic risk specific to individual assets.

Risk that affects a large number of assets, each to a greater or lesser degree.

What is a portfolio, and how is it structured for an investor? A 529 account for educational savings. A group of assets held as a collective unit by an investor. Perfect correlation between asset returns. A strategy for diversification.

A group of assets held as a collective unit by an investor.

What is the risk-free rate, and how does it relate to the Security Market Line (SML)? The risk-to-reward ratio for investments. The slope of the SML representing market risk. The pure time value of money and intercept of the SML. The market risk premium over the risk-free rate.

The pure time value of money and intercept of the SML.

How is the dividend yield of a stock calculated, and what does it represent? The dividend policy set by the board. The retained earnings of a company. The capital gain from selling the stock. A stock's annual dividend divided by its beginning of period price.

A stock's annual dividend divided by its beginning of period price.

What does beta measure in terms of systematic risk for a particular asset? The volatility of returns compared to the market. The geometric average return of the asset. The amount of systematic risk in a particular asset, relative to the systematic risk in an average risky asset. The variance of returns over time.

The amount of systematic risk in a particular asset, relative to the systematic risk in an average risky asset.

What is the asset's portfolio weight, and how is it determined? The asset's beta relative to the market. The asset's expected return based on historical data. The asset's realized return over a period. The percentage of a portfolio's total market value invested in a particular asset.

The percentage of a portfolio's total market value invested in a particular asset.

What is the core principle of the revenue standard, including the depiction of the transfer of promised goods or services? Recognize revenue only when cash is received from the customer Recognize revenue to depict the transfer of promised goods or services to the customers in any amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services Recognize revenue based on the cost incurred to deliver the goods or services Recognize revenue when the contract is signed, regardless of delivery

Recognize revenue to depict the transfer of promised goods or services to the customers in any amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services

What describes the condition(s) that must be present for the recognition of revenue from a contract with a customer? The customer must have paid in full The goods must be delivered to the customer One of the contract's performance obligations must be fulfilled The contract must be legally binding

One of the contract's performance obligations must be fulfilled

What are the 5 steps to recognize revenue, including identifying contracts and performance obligations? 1. Draft the contract 2. Agree on terms 3. Deliver goods 4. Invoice the customer 5. Receive payment 1. Sign the contract 2. Deliver the goods 3. Receive payment 4. Record the transaction 5. Close the contract 1. Identify the customer 2. Determine the price 3. Deliver the goods 4. Receive payment 5. Record revenue 1. Identify the contract with the customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Recognize revenue when or as the entity satisfies a performance obligation

1. Identify the contract with the customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Recognize revenue when or as the entity satisfies a performance obligation

Explain step 1 (identify the contract with a customer) in the revenue recognition process. The contract must include a detailed list of goods and services Existence of a contract may involve but does not require a legal document; based on normal business practices, might be an oral agreement or legal document; the contract should create enforceable rights and obligations The contract must be signed by both parties and notarized The contract must be registered with a government agency

Existence of a contract may involve but does not require a legal document; based on normal business practices, might be an oral agreement or legal document; the contract should create enforceable rights and obligations

Explain step 2 (Identify the performance obligations in the contract) in the revenue recognition process. The performance obligations must be listed in the contract The performance obligations are determined by the customer The 'deliverables' that the company agrees to provide to the customer; each performance obligation should be distinct (capable of providing benefits on its own or in combination with readily available resources); separately purchased 3-year extended warranty on a car is a distinct obligation The performance obligations are based on industry standards

The 'deliverables' that the company agrees to provide to the customer; each performance obligation should be distinct (capable of providing benefits on its own or in combination with readily available resources); separately purchased 3-year extended warranty on a car is a distinct obligation

Explain step 3 (determine the transaction price) in the revenue recognition process. The transaction price is determined by market conditions The transaction price is the list price of the goods or services The transaction price is the amount paid by the customer The amount to which the seller expects to be entitled to receive when the contract performance obligations are fulfilled; includes variable considerations (volume discounts, credits, royalties --> requires estimates by management prior to completion of the contract)

The amount to which the seller expects to be entitled to receive when the contract performance obligations are fulfilled; includes variable considerations (volume discounts, credits, royalties --> requires estimates by management prior to completion of the contract)

Explain step 4 (Allocate the transaction price to performance obligations) in the revenue recognition process. The transaction price is allocated based on the customer's preference Required if there are multiple performance obligations (step two); based on stand-alone selling prices of the performance obligations (must be estimated if not available); Allocate total transaction price based on individual SSPs The transaction price is allocated equally among all obligations The transaction price is allocated based on the contract terms

Required if there are multiple performance obligations (step two); based on stand-alone selling prices of the performance obligations (must be estimated if not available); Allocate total transaction price based on individual SSPs

Explain step 5 (Recognize revenue when (or as) the seller satisfies a performance obligation) in the revenue recognition process. Revenue is recognized when the contract is signed Performance obligation is satisfied when the customer obtains control of the product or service; when the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits (risks and rewards); This condition may be satisfied over time or at a point in time Revenue is recognized when the payment is received Revenue is recognized when the invoice is sent

Performance obligation is satisfied when the customer obtains control of the product or service; when the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits (risks and rewards); This condition may be satisfied over time or at a point in time

What are the two complications when recognizing revenue, particularly in complex sales arrangements? Bundled sales contracts and long-term projects Sales with rebates and sales with financing Sales to international customers and sales with discounts Sales with returns and sales with warranties

Bundled sales contracts and long-term projects

What is a Bundled Sales Contract, and how does it affect revenue recognition? A contract where products are sold with a financing option A contract where multiple products are sold at a discount Two or more products or services are sold under the same sales agreement for one lump-sum price but are considered separate performance obligations (very common in software industry). Performance Obligation 1: Computer (revenue recognized upon transfer to customer). Performance Obligation 2: Technical support package (revenue recognized ratably over 2 year period - deferred revenue before revenue) A contract where services are bundled with a subscription

Two or more products or services are sold under the same sales agreement for one lump-sum price but are considered separate performance obligations (very common in software industry). Performance Obligation 1: Computer (revenue recognized upon transfer to customer). Performance Obligation 2: Technical support package (revenue recognized ratably over 2 year period - deferred revenue before revenue)

Which inventory valuation method assumes the first (or oldest) items purchased are the first items sold? Weighted Average Inventory Costing Method (WA) Last In, First Out Inventory Costing Method (LIFO) First In, First Out Inventory Costing Method (FIFO) Specific Identification Inventory Costing Method (SI)

First In, First Out Inventory Costing Method (FIFO)

Which inventory valuation method assumes the last (or newest) items purchased are the first items sold? Last In, First Out Inventory Costing Method (LIFO) Specific Identification Inventory Costing Method (SI) First In, First Out Inventory Costing Method (FIFO) Weighted Average Inventory Costing Method (WA)

Last In, First Out Inventory Costing Method (LIFO)

Which inventory valuation method involves recording and tracking the unit cost of every item individually from purchase to sale? Last In, First Out Inventory Costing Method (LIFO) First In, First Out Inventory Costing Method (FIFO) Specific Identification Inventory Costing Method (SI) Weighted Average Inventory Costing Method (WA)

Specific Identification Inventory Costing Method (SI)

Which inventory valuation method uses a weighted average unit price for all merchandise available for sale to allocate inventory costs? Specific Identification Inventory Costing Method (SI) Weighted Average Inventory Costing Method (WA) Last In, First Out Inventory Costing Method (LIFO) First In, First Out Inventory Costing Method (FIFO)

Weighted Average Inventory Costing Method (WA)

Which of the following statements is true regarding the specific identification inventory costing method? The specific identification method assumes the newest items are sold first. The specific identification method assumes the oldest items are sold first. The specific identification method uses a weighted average for cost allocation. The specific identification method only works if every inventory item has a unique tracking number.

The specific identification method only works if every inventory item has a unique tracking number.

Which of the following statements is true about the FIFO method? The FIFO method assumes the newest items purchased are sold first. The FIFO method uses a weighted average for cost allocation. The FIFO method requires unique tracking numbers for each item. The FIFO method assumes the oldest items purchased are sold first.

The FIFO method assumes the oldest items purchased are sold first.

When prices are increasing over time, which inventory costing method will result in the lowest cost of goods sold? First In, First Out Inventory Costing Method (FIFO) Specific Identification Inventory Costing Method (SI) Last In, First Out Inventory Costing Method (LIFO) Weighted Average Inventory Costing Method (WA)

First In, First Out Inventory Costing Method (FIFO)

When prices are decreasing over time, which inventory costing method will result in the highest cost of goods sold? Specific Identification Inventory Costing Method (SI) Last In, First Out Inventory Costing Method (LIFO) First In, First Out Inventory Costing Method (FIFO) Weighted Average Inventory Costing Method (WA)

Last In, First Out Inventory Costing Method (LIFO)

Which of the following is true regarding the cost flow of inventory and physical flow of inventory? The physical flow of inventory always matches the cost flow. The cost flow of inventory is always affected by changes in purchase prices. The cost flow of inventory is not affected by changes in purchase prices. The physical flow of inventory is independent of the cost flow.

The cost flow of inventory is not affected by changes in purchase prices.

What are the classifications of investments that account for market rate changes and unrealized gains or losses? Fixed Income, Variable Income, Hybrid Investments Domestic Investments, International Investments, Emerging Market Investments Short-Term Investments, Long-Term Investments, Equity Investments Held-to-Maturity (HTM), Trading Security (TS), Available-for-Sale (AFS)

Held-to-Maturity (HTM), Trading Security (TS), Available-for-Sale (AFS)

Finance

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