1. c. Correct.
 
 

2. a. Correct. The financial highlights are part of the chairman of the board’s explanation of the progress over the ensuing year.
 
 

3. d. Correct. See the sample opinion letter in case reading 2-8a.
 
 

4. d. Correct. The opinion is always specific stating the year(s) covered which may be the most recently completed fiscal year, or the last two or three years. An opinion will never cover all years since the start of the corporation.
 
 

5. a. Correct.
 
 

6. b. Correct. Footnotes do not discuss the company's adherence to GAAP. There are the three types of footnotes. See page 191.
 
 

7. a. Correct. See page 192.
 
 

8. d. Correct.
 
 

9. b. Correct. 1.08 ´ 1.08 ´ $7 billion = $8.165 billion
 
 

10. c. Correct. $60,000,000 - .30($60,000,000) ¸ 10,000,000 = $4.20
 
 

11. b. Correct. It is the alternative with a reasonable amount of debt. Company P is too risky while R and S are too conservative, not taking advantage of the low interest rates on long-term debt. The company can borrow at 5% and earn 10% net income on that money.
 
 

12. c. Correct. Answers a and b are considered to be cash but not cash equivalents and d is a receivable not included as cash or equivalents. See page 200.
 
 

13. c. Correct. See page 205.
 
 

14. a. Correct. The CFO section of the statement of cash flows converts accrual measurement of net income into a cash basis measurement of net income.
 
 

15. b. Correct. It is not a prudent management philosophy to finance current operations by selling fixed assets. There is no way to tell from the information given, if the company had a net income or a net loss.