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Exam 17: Understanding Accounting and Financial Information

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Question 171

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The ______________ shows how the capital is structured in the business,including the value of assets and the amount the firm owes at a specific point in time.

A) income statement
B) balance sheet
C) statement of cash flows
D) trial balance

E) None of the above
F) A) and B)

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Question 172

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Which of the following ratios is a liquidity ratio?

A) Inventory turnover ratio
B) Acid-test ratio
C) Debt to owners' equity ratio
D) Basic earnings per share

E) A) and B)
F) A) and C)

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Question 173

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Marshall McBride inherited $10,000 from his Great Aunt Martha.He invested $5,000 in a new,risky start-up venture,10^th Generation,Inc. ,and the other $5,000 in Major Chemicals,Inc,a well-known chemical company that's been around for years.Today,his financial planner called to inform him that the Return on Equity on 10^th Generation = 6.28%;and,Return on Equity on Major Chemicals = 10.50%.Which of the following facts is important information for Marshall McBride?

In large companies,certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses.

Perry is responsible for recording sales transactions at Turncoat Enterprises.Perry's company utilizes _____________________,to help minimize entry errors.

An important difference between accounting and other business functions,such as marketing and management,is that:

The return on sales ratio measures a firm's use of leverage.

Cindy is concerned because during the past four months her company has experienced difficulty in paying its bills on time.She knows if this continues,the firm will have difficulties in accomplishing its goals.Cindy is concerned with:

The books where accounting data are first entered are called ledgers.

The Barkley Company is a fast growing start-up.The accountant calculated earnings per share = $.13.This information will provide him/her with insight into the firm's ability to pay dividends.

Derek has a bachelor's degree in accounting and additional training in tax law.He is responsible for preparing tax returns and developing tax strategies for his employer,and has done so for the past seven years.Derek is a certified government accountant.

The balance sheet is composed of the following types of accounts:

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

In businesses that handle a lot of perishable items (such as supermarkets)the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.

At present,accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

The cost of goods sold reflects the selling price of the merchandise sold over a period of time.

The Sarbanes-Oxley Act prohibits accounting firms from providing certain non-auditing work (such as consulting services)to companies they audit.

Accounting provides financial information that can be useful to owners,creditors,suppliers,employees,and competitors of an organization.

__________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock,stock options,warrants and convertible debt securities are also taken into account.

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