Question 1) In our real life, the value of assets cannot be estimated perfectly because we can't be certain for the future cash flows that the asset generates and also we can't be certain for the discount rate. Because of the uncertainty for the future cash flows and the discount rate, we cannot complete the balance sheet if we do have the income statement first.

Can you explain how the uncertainty is related to earnings quality and how the uncertainty can be reduced?

Question 2) Company A and Company B each have a $ 10,000 bond outstanding

If both companies' bonds are due in ten years, what factors might make the bond market value the Company A bond at an amount greater than the Company B bond? If so, would Company A have a higher credit rating than Company B? If so, would the market rate of the Company A bond be higher than the market rate of the Company B bond (using the guidance in SFAC No. 7)?

If both companies have the same credit rating, what factors might make the bond market value the Company A bond at an amount greater than the Company B bond (using the guidance in SFAC No 7)?

I would like to confirm that my answers below are correct. Thank you!

Question 3) In the market, what form of EMH has been generally supported?

A) strong

B) semistrong

C) weak

Question 4) Which one is false for the capital asset pricing model (CAPM)

A) CAPM is based on the positive relation between risks and returns

B) CAPM can be used to forecast an unexpected return of individual security

C) CAPM assumes that only systematic risk is rewarded in the market, and unsystematic risk can be diversified by making portfolio

D) CAPM is based on fundamental analysis

Question 5) Which one is false?

A) to measure the risk, CAPM assumes a possibility of mispricing in the market

B) the risk measure in CAPM is the beta

C) the risk is measured based on the relation between market portfolio return and individual security return

D) a higher risk measure means that investors require more return

Question 6) What income measurement approach is comprehensive income based?

A) traditional accounting transactions approach

B) revenue recognition approach

C) capital maintenance approach

D) cash-based approach

Question 7) Which one is false?

A) IASB has no enforcement authority for company's adoption of international accounting standards

B) FASB is not a member of IASB

C) on Dec 17, 2003, IASB published the revised international accounting standards

D) to list their securities in the US markets, foreign companies must recast their financial statements based on either US GAAP or International Accounting Standards

Question 8) Which one is false?

A) Agency theory is based on the assumption that a conflict of interest exists between the owners of a firm and the managers

B) SFAS No 1 suggests that financial reporting should provide the information for the potential agency costs of the firm

C) Generally companies' agency costs are not controlled by companies themselves

D) The agency relation is defined as a relationship by consent between two parties, whereby one party agrees to act on behalf of the other

Question 9) Which one is not a main objective of financial reporting on SFAC 1?

A) to provide information for assessing cash-flow prospects

B) to provide information for making investment and credit decisions

C) to provide information for evaluating management stewardship and peformance

D) to provide information for customer relationship management

Question 10) Which one is false?

A) the fundamental analysis heavily depends on the accounting and financial information

B) the fundamental analysis is to find mispriced securities in the market

C) fundamental analysis is based on the efficient market hypothesis