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Chapter Quiz

What is the difference between basic earnings per share and diluted earnings per share (EPS)?

  • Basic EPS include preferred shares
  • Basic EPS include net revenue.
  • Diluted EPS are calculated after taxes have been paid.
  • Diluted EPS includes potential shares that will likely be converted to actual shares. (Options to buy shares are added to the number of outstanding shares in the diluted EPS calculation.)

An estimate of the wear and tear on a long-term physical asset is known as ___

  • debit
  • depreciation (Depreciation is used to estimate the value of an asset over time.)
  • appreciation
  • interest

Which country uses accounting practices defined by the Financial Accounting Standards Board (FASB)?

  • Germany
  • Japan
  • England (England uses the accounting standards published by the International Accounting Standards Board (IASB), based in London.)
  • United States (The FASB is based in Connecticut, and it defines the accounting rules for the United States.)

What is the only type of investment that can be classified as available for sale securities?

  • a real estate investment trust
  • a long-term bond (Investment in the long-term debt of another company could be classified as an available-for-sale security)
  • a common stock
  • a preferred stock
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