64 Essay Questions 1. What is "Basic EPS" and how is it calculated? Is this number a good indicator for future company profitability? How does it differ from "Diluted EPS"? (Chapter 4, Section 6.2) 2 Discuss what is Net Reporting and give an example of a company that may use it. Justify your example. (Chapter 3, Section 3.2.4) 3. Why is it important for analysts that Discontinued Operations be listed separately in a company's financial statements? What problems would be created if they were not presented separately and for which users of financial statements? (Chapter 3, Section 5.2) 4. What is vertical common-size analysis in financial statements? Explain why we need to use in the balance sheet and the income statement. Build a common-size statement. (Chapter 3 and 4, Section 7.1) S. Polyzos - FINA21 Miderm Revision 65 Essay Questions 5. State your preference between the direct and indirect method for reporting Cash Flows from Operation activities. Justify your answer. (Chapter 5. Section 2.3) 6. Assume that a company purchases land for €100,000, paying €20.000 cash and borrowing the remainder with a long-term bank loan. What is the cash flow from Financing activities? How do you expect the company's CFO, CFI and CFF to change in the following years based on this purchase, assuming the company works with IFRS? (Chapter 5, Section 3.2) 7. Discuss the differences in the evaluation methods for PP&E permitted under IFRS and under US GAAP. What other differences exist in the measurement of PP&E between IFRS and US GAAP and how do these differences affect the resulting financial statements. (Chapter 4, Section 4.1) S. Polyzos - FIN421 Midterm Revision