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Exam 17: Understanding Accounting and Financial Information

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Question 51

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Activities of managerial accountants include measuring and reporting the costs of production, marketing and other functions within the organization.

A) True
B) False

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Question 52

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The Barkley Company's balance sheet shows: what the business owns, minus what the business owes, which equals the book value (or net worth) of the business.

A) True
B) False

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Question 53

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The financial ratios that measure a firm's ability to pay its short-term debts are called:

The key financial statements are the balance sheet, the income statement, and the statement of cash flows.

Double-entry bookkeeping requires that every transaction be recorded in two places.

An analysis of the statement of cash flows can help a firm prevent cash shortages.

Allison Robards is the owner of Backstreet Books, a small eclectic-style bookstore in a bustling college town. Allison prides herself in selecting hard to find books and magazines that her clientele enjoy. Recently, Allison is experiencing a cash flow shortage, and she is concerned that she may be purchasing too many copies of each title. Having recently completed a business class, you suggest to Allison that she calculate the ______________ ratio for her store, and then compare it to other stores in her industry.

As an accountant, Joe's responsibilities include:

Julio borrowed money from a close friend to obtain a liquor license for his pub, and gave him a written promise to repay the amount within six months. Julio should list this business debt as an operating expense on his pub's balance sheet.

We would expect the inventory turnover ratio for a ski shop to be _______ than the turnover for a convenience store.

One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions.

The accounting book or computer program where each day's transactions are first recorded is called a:

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

Carol has worked as a bookkeeper for a small clothing store for almost three years. Her old boss recently retired and a new manager took over. The new manager frequently asks her for information and advice about how to interpret the information she records. Carol's experience as a bookkeeper means she is qualified to provide this type of advice.

Financial accounting involves activities such as preparing budgets and measuring production costs.

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

An accountant who has a bachelor's degree, two years of experience in internal auditing and who has passed an exam by the Institute of Internal Auditors can become recognized as a certified internal auditor.

Computerized accounting programs have eliminated the need to prepare a trial balance.

The LIFO method of inventory valuation bases the cost of goods sold on the cost of: