Question 1

A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.

Accepted Answer

A) True 
 B)False

Question 2

The value of things you own minus the amount of money you owe others is called:

Accepted Answer

A)  leverage.
B)  equity.
C)  liquidity.
D)  liabilities.E) B) and C)
F) A) and D)

Question 3

The higher the risk of a particular investment,the greater the expected rate of return required by investors.

Accepted Answer

A) True 
 B)False

Question 4

Which key provision of the Sarbanes-Oxley act should minimize the opportunity for public accountants to minimize conflict of interest?

Accepted Answer

A)  Establish a maximum fees chargeable by public accountants to firms they do work for
B)  Strengthens the protection for whistleblowers
C)  Having the CEO's and CFO's certify the accuracy of financial reports
D)  Prohibits accounting firms to provide consulting services and audit the same firmE) A) and B)
F) A) and C)

Question 5

A cash flow statement reports cash receipts and disbursements for a firm that results:

Accepted Answer

A)  from its operations,investments,and financing.
B)  only from its operations.
C)  from both its operations and investments,but not from its financing.
D)  only from its investments.E) A) and C)
F) C) and D)

Question 6

A(n) ______is an evaluation and unbiased opinion of the accuracy of a firm's financial statements.

Accepted Answer

A)  independent audit
B)  annual report
C)  certified audit
D)  internal auditE) A) and B)
F) A) and C)

Question 7

Deron 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,Lighting Freight Service,and has done so for the last seven years.Deron is a certified government accountant.

Accepted Answer

A) True 
 B)False

Question 8

The______ is an accounting statement that reports the financial condition of a firm at a specific point in time.

Accepted Answer

A)  balance sheet
B)  income statement
C)  trial balance
D)  cash flow statementE) C) and D)
F) A) and B)

Question 9

Cash provided by the sale of new cars at Joseph's Car Sales would be listed as a cash inflow from operations on Joseph's statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 10

A balance sheet is composed of assets,liabilities,and revenues.

Accepted Answer

A) True 
 B)False

Question 11

Assets are economic resources that are owned by a firm.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A lower than average inventory turnover ratio indicates excellent inventory management practices.

Accepted Answer

A) True 
 B)False

Question 14

Which financial statement reports the company's revenues and selling costs over a period of time?

Accepted Answer

A)  trial balance
B)  income statement
C)  balance sheet
D)  cash flow statementE) A) and D)
F) A) and C)

Question 15

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.

Accepted Answer

A) True 
 B)False

Question 18

Information contained in a firm's annual report largely represents work done by managerial accountants.

Accepted Answer

A) True 
 B)False

Question 19

Bookkeeping is part of accounting,but accounting goes far beyond the activities involved in bookkeeping.

Accepted Answer

A) True 
 B)False

Question 20

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.

Accepted Answer

A) True 
 B)False

Exam 16: Understanding Accounting and Financial Information

A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.

Correct AnswerverifiedShow Answer

A lower than average inventory turnover ratio indicates excellent inventory management practices.

Correct AnswerverifiedShow Answer

The value of things you own minus the amount of money you owe others is called:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The higher the risk of a particular investment,the greater the expected rate of return required by investors.

Correct AnswerverifiedShow Answer

Deron 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,Lighting Freight Service,and has done so for the last seven years.Deron is a certified government accountant.

Correct AnswerverifiedShow Answer

Cash provided by the sale of new cars at Joseph's Car Sales would be listed as a cash inflow from operations on Joseph's statement of cash flows.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The______ is an accounting statement that reports the financial condition of a firm at a specific point in time.

Correct AnswerverifiedShow Answer

A balance sheet is composed of assets,liabilities,and revenues.

Correct AnswerverifiedShow Answer

Assets are economic resources that are owned by a firm.

Correct AnswerverifiedShow Answer

A cash flow statement reports cash receipts and disbursements for a firm that results:

Correct AnswerverifiedShow Answer

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.

Correct AnswerverifiedShow Answer

Which key provision of the Sarbanes-Oxley act should minimize the opportunity for public accountants to minimize conflict of interest?

Correct AnswerverifiedShow Answer

A(n) ______is an evaluation and unbiased opinion of the accuracy of a firm's financial statements.

Correct AnswerverifiedShow Answer

Information contained in a firm's annual report largely represents work done by managerial accountants.

Correct AnswerverifiedShow Answer

Bookkeeping is part of accounting,but accounting goes far beyond the activities involved in bookkeeping.

Correct AnswerverifiedShow Answer

Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.

Correct AnswerverifiedShow Answer

Which financial statement reports the company's revenues and selling costs over a period of time?

Correct AnswerverifiedShow Answer

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Correct AnswerverifiedShow Answer

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