1. When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e., nonrecurring) gains or losses and certain other non-cash charges, such earnings are frequently referred to as:

Multiple Choice

• pro forma earnings.

• real earnings.

• sustainable earnings.

• normal earnings

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2. Investors and analysts must have certain capabilities regarding financial reporting which include:

Multiple Choice

• an understanding of current financial reporting standards.

• an ability to recognize that financial statement information reported is grounded in judgment as well as facts.

• all of these answer choices are correct.

• recognition that management selects the financial reporting standards used.

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3. When a borrower violates a loan covenant that requires minimum achievement of an accounting measure in the financial statements, the lender can:

Multiple Choice

• call for immediate repayment of the loan.

• report the borrower to the IRS.

• fire the chief operating officer of the borrower.

• immediately seize the loan collateral.

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