Chapter 1 Practice Question Answers
1. Answer: A. An institutional investment manager that exercises investment discretion over at least $100 million of securities that are traded on stock exchanges or Nasdaq must file a Form 13F disclosing those holdings on a quarterly basis. Schedule 14A is used for proxy statements. Form 4 is used to disclose changes in the beneficial ownership of securities by insiders (e.g., directors, officers, and major stockholders) of publicly traded companies. Form 8-K is used by public companies to report material “current information” to shareholders.
2. Answer: D. Form 10-K is the annual report that every public company must file with the SEC. The 10-K includes audited annual financial statements, so it is the basic document to go to for information about a public company’s finances. In most cases, it will also be necessary to look at one or more of the company’s 10-Qs, quarterly reports that contain unaudited quarterly financial statements, to get a full picture of the most recent 12-month period for which financials are available. Therefore, both I and III are usually necessary for an LTM analysis. Schedule 13D is used to report the acquisition of beneficial ownership of more than 5% of a voting class of securities of a public company; it does not include company financials. Form 3 is used to report beneficial ownership by insiders or major shareholders (owners of more than 10% of any class of a company’s equity securities); again, this form does not include company financials.
3. Answer: B. A deferred asset is a prepaid expense, such as taxes, insurance, or rent. When the expense is paid, it is logged as a deferred asset, and when it is recognized, the deferred asset is removed from the balance sheet.
Current deferred assets are assets that the company expects to be recognized within a year—in other words, the company expects the paid-for good or service to be used within a year. Non-current deferred asset