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Exam 17: Understanding Accounting and Financial Information

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Question 81

Multiple Choice

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Generally,a high ___________ ratio could lead investors and creditors to view the company as being very risky.

A) debt to owners' equity
B) acid-test
C) diluted earnings per share
D) inventory turnover

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

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Question 82

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The "bottom line" of the Barkley Company's income statement is equal to the net worth of the firm.

A) True
B) False

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Question 83

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Accountants do the work involved in recording financial events and transactions,but the actual classifying and interpreting of this data is left to financial managers.

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

The purpose of a trial balance is to:

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

Expenses a firm incurs for insurance,office salaries,and rent are classified as:

Generally accepted accounting principles (GAAP)permits firms to choose among different methods of depreciation and inventory valuation.

The preparation of financial statements for people outside the firm (creditors,unions,suppliers,and others) is the goal of:

Citizens and special interest groups often have interest in the information generated by government accounting.

FIFO is a method of inventory valuation that assumes the items most recently purchased are also the items that are sold first.

Revenue on the income statement represents the dollar amount of what is received for goods sold,services rendered and/or from other revenue sources.

The accounting profession is divided into two main fields: bookkeeping and auditing.

As U.S.firms focus on cost cutting in order to stay competitive with producers in low-wage countries,they will rely on __________ to create strategies to help reduce costs.

Mini-Case Minnie A.Wright-Hoff works as an accountant for Double Entry Doors,Inc.Her company sells and installs oversized garage doors needed by large vehicles.Most of Minnie's work involves helping department heads and other decision-makers by measuring and reporting costs for their departments,and by identifying areas where departments are exceeding their budgets.However,as one of only three accountants employed by Double Entry Doors,Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments.For example,she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced.Her efforts revealed no problems,so she is now ready to start working on the firm's financial statements.Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report.She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -The fact that Minnie spends most of her time measuring costs and checking to see if departments are staying within their budgets suggests that she is often involved in:

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

Peak Performance Sporting Goods Company continues to perform well in spite of an economic recession.Company executives credit this to the strong partnerships it enjoys with category killer and large discount chains.Last week Peak Performance reported basic EPS [earnings per share] = $.80/share.If the firm has 4,000,000 shares outstanding,net income after taxes for the same period = _____.

Carlisle Communications is preparing its statement of cash flows.Among other things,this statement will show:

If prices of inventory are unchanged throughout the year,LIFO and FIFO inventory valuation methods will produce the same reported net income.

If a firm can reduce its cost of goods sold and continue to sell its product for the same price,we would expect the firm to enjoy an increase in its: