Question 1

The fundamental accounting equation states: Assets = __________.

Accepted Answer

A)  liabilities minus owners' equity
B)  liabilities plus receivables
C)  payables plus cash equivalents
D)  liabilities plus owners' equityE) All of the above
F) B) and C)

Question 2

Which of the following would be classified as a general expense on an income statement?

Accepted Answer

A)  Salaries paid to salespeople
B)  Dividends paid to stockholders
C)  Payments made for insurance
D)  Costs associated with an advertising campaignE) None of the above
F) B) and C)

Question 3

Given that measuring a firm's financial health is important to its survival,which of the following strategies is good advice for a person just starting a business?

Accepted Answer

A)  Create a method for keeping your books that makes sense to you.Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books.
B)  All transactions are important.Separating transactions only serves to create a perception that some transactions are of lesser importance than others.
C)  Accounting systems used by big business are not suitable for small businesses.
D)  Select an accounting system that helps you make decisions,and helps you report information to others outside your firm.E) B) and C)
F) A) and D)

Question 4

Profitability ratios are often used to measure management's earnings performance.

Accepted Answer

A) True 
 B)False

Question 5

The statement of cash flows shows a firm's revenues,costs of goods sold,expenses,and net income.

Accepted Answer

A) True 
 B)False

Question 6

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Accepted Answer

A) True 
 B)False

Question 7

The most liquid asset is:

Accepted Answer

A)  Sales.
B)  Cash.
C)  Accounts payable.
D)  Owners' equity.E) B) and C)
F) A) and D)

Question 8

Ralph owns a small business.Some friends have suggested that he should switch from his current manual accounting system to one that is computerized.Ralph is not certain he wants to use computers in his small firm's accounting system.He is concerned about the time it would take to learn the system,and wonders whether the benefits will justify the costs of setting up the system.As a small business owner,Ralph would probably find that:

Accepted Answer

A)  Computer software tends to be very helpful to small business owners who lack strong accounting support within their companies.
B)  Today's accounting software tends to be very complex,so only people with extensive accounting experience can understand its features and use it effectively.
C)  Even though it is not yet cost effective,he should go ahead and adopt a computerized system,because government regulations will require most business functions to be computerized in the near future.
D)  Such systems actually reduce costs,because they eliminate the need to consult with an accountant.E) All of the above
F) B) and C)

Question 9

A comparison of bookkeeping and accounting indicates that:

Accepted Answer

A)  The two are virtually the same in practice.
B)  Bookkeeping involves recording financial information,while accounting is concerned with classifying,summarizing,and interpreting this information.
C)  Bookkeeping is more useful for small businesses while accounting is more useful for large businesses.
D)  Accounting is a subsystem of the process of bookkeeping.E) A) and B)
F) B) and D)

Question 10

In order to calculate the current ratio for your firm,you divide the total value of current assets by:

Accepted Answer

A)  Earnings per share.
B)  The total value of current liabilities.
C)  The total owners' equity.
D)  The total cost of goods sold.E) A) and B)
F) A) and D)

Question 11

Your firm is a supplier to a major chain of discount stores.You have heard rumors that this chain of discount stores is in financial difficulty.Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

Accepted Answer

A)  liquidity ratios
B)  leverage ratios
C)  activity ratios
D)  profitability ratiosE) A) and D)
F) A) and C)

Question 12

__________ 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.

Accepted Answer

A)  Basic
B)  Diluted
C)  Restricted
D)  Broad-basedE) All of the above
F) A) and B)

Question 13

Accounting is an easy subject for people to understand because almost everyone is exposed to basic accounting concepts in their everyday life.

Accepted Answer

A) True 
 B)False

Question 14

Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting.

Accepted Answer

A) True 
 B)False

Question 15

The purpose of a trial balance is to prepare a practice balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

Financial ratios are used to analyze a firm's financial condition and financial performance.

Accepted Answer

A) True 
 B)False

Question 17

Preferred Pet Care,Inc.a mobile veterinary care clinic has more appointments than it ever expected to have when it opened its doors.Each week it orders more vaccines,antibiotics,and preventive care supplies from a major veterinary supplier,with the understanding that it will pay for these supplies in one month's time.Most of the company's clients are elderly and on fixed incomes,and often do not pay for services for two or more months.This is not a problem because as long as the company continues to increase its appointments,it will create profits and growth.

Accepted Answer

A) True 
 B)False

Question 18

Liquidity ratios are of particular importance to stockholders,but have little relevance for creditors.

Accepted Answer

A) True 
 B)False

Question 19

Tyler works as an accountant for a mid-sized retail store.He has just completed a trial balance that resulted in no unexpected problems.Tyler's next task is likely to be:

Accepted Answer

A)  Conducting the full audit.
B)  Preparing a tax return for the company.
C)  Preparing the store's balance sheet and other major financial statements.
D)  Presenting the trial balance to the company owners.E) None of the above
F) A) and C)

Question 20

At the time the Jepson Plumbing Supply prepared its financial statements,it had several customers who bought goods over the past three months on its "90 days same as cash" credit plan.These customers had not yet paid their bills,but they have good credit ratings and Jepson is confident that they will make their payments on time.The amount these credit customers owe would show up as part of the:

Accepted Answer

A)  current assets listed on Jepson's balance sheet.
B)  current liabilities listed on Jepson's balance sheet.
C)  a deferred cash flow on Jepson's statement of cash flows.
D)  unrealized revenue reported on Jepson's income statement.E) A) and B)
F) C) and D)

Exam 17: Understanding Accounting and Financial Information

Your firm is a supplier to a major chain of discount stores.You have heard rumors that this chain of discount stores is in financial difficulty.Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

Correct Answer
verified

Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting.

Correct Answer
verified

The purpose of a trial balance is to prepare a practice balance sheet.

Correct Answer
verified

__________ 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.

Correct Answer
verified

Given that measuring a firm's financial health is important to its survival,which of the following strategies is good advice for a person just starting a business?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Financial ratios are used to analyze a firm's financial condition and financial performance.

Correct Answer
verified

Accounting is an easy subject for people to understand because almost everyone is exposed to basic accounting concepts in their everyday life.

Correct Answer
verified

Profitability ratios are often used to measure management's earnings performance.

Correct Answer
verified

The statement of cash flows shows a firm's revenues,costs of goods sold,expenses,and net income.

Correct Answer
verified

The fundamental accounting equation states: Assets = __________.

Correct Answer
verified

Tyler works as an accountant for a mid-sized retail store.He has just completed a trial balance that resulted in no unexpected problems.Tyler's next task is likely to be:

Correct Answer
verified

A comparison of bookkeeping and accounting indicates that:

Correct Answer
verified

Liquidity ratios are of particular importance to stockholders,but have little relevance for creditors.

Correct Answer
verified

In order to calculate the current ratio for your firm,you divide the total value of current assets by:

Correct Answer
verified

Correct Answer
verified

The most liquid asset is:

Correct Answer
verified

Which of the following would be classified as a general expense on an income statement?

Correct Answer
verified

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Correct Answer
verified

Exam 17: Understanding Accounting and Financial Information

Your firm is a supplier to a major chain of discount stores.You have heard rumors that this chain of discount stores is in financial difficulty.Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

Correct AnswerverifiedShow Answer

Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting.

Correct AnswerverifiedShow Answer

The purpose of a trial balance is to prepare a practice balance sheet.

Correct AnswerverifiedShow Answer

__________ 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.

Correct AnswerverifiedShow Answer

Given that measuring a firm's financial health is important to its survival,which of the following strategies is good advice for a person just starting a business?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Financial ratios are used to analyze a firm's financial condition and financial performance.

Correct AnswerverifiedShow Answer

Accounting is an easy subject for people to understand because almost everyone is exposed to basic accounting concepts in their everyday life.

Correct AnswerverifiedShow Answer

Profitability ratios are often used to measure management's earnings performance.

Correct AnswerverifiedShow Answer

The statement of cash flows shows a firm's revenues,costs of goods sold,expenses,and net income.

Correct AnswerverifiedShow Answer

The fundamental accounting equation states: Assets = __________.

Correct AnswerverifiedShow Answer

Tyler works as an accountant for a mid-sized retail store.He has just completed a trial balance that resulted in no unexpected problems.Tyler's next task is likely to be:

Correct AnswerverifiedShow Answer

A comparison of bookkeeping and accounting indicates that:

Correct AnswerverifiedShow Answer

Liquidity ratios are of particular importance to stockholders,but have little relevance for creditors.

Correct AnswerverifiedShow Answer

In order to calculate the current ratio for your firm,you divide the total value of current assets by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The most liquid asset is:

Correct AnswerverifiedShow Answer

Which of the following would be classified as a general expense on an income statement?

Correct AnswerverifiedShow Answer

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified