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From a bankers perspective, the most important ratio on the customers financial statement is - CORRECT ANSWERS ✔✔Current Ratio Which of the following is an operating performance ratio? Debt to total assets Times interest earned Payout ratio Times interest earned and payout ratio None - CORRECT ANSWERS ✔✔Times interest earned and Payout Ratio Horizontal analysis compares the components of a balance sheet with a base item. T/F - CORRECT ANSWERS ✔✔False Since companies have different numbers of shares outstanding, it is not useful to compare earnings per share ratios. T/F - CORRECT ANSWERS ✔✔True There are two ratios that help define the operating cycle. They are: receivables and inventory turnover
receivables and accounts payable inventory and accounts payable turnover none of these - CORRECT ANSWERS ✔✔Receivables and accounts payable The ratio that shows the markup in price over the cost of goods sold is profit margins gross margin ratio return on assets asset turnover none - CORRECT ANSWERS ✔✔Gross margin ratio The ratio that shows how investors value the stock is payout ratio earnings per share return on equity return on assets none - CORRECT ANSWERS ✔✔None Financial strength ratios are utilized to help predict the long-run solvency of a company. T/F - CORRECT ANSWERS ✔✔True
managerial accounting financial accounting tax accounting none - CORRECT ANSWERS ✔✔Tax accounting Owners in corporations are liable only for the amount they have invested and no more. T/F - CORRECT ANSWERS ✔✔True Information that can make a difference to the decision at hand is considered to be: reliable comparable conservatism understandability none - CORRECT ANSWERS ✔✔None - relevancy In a proprietorship: there is no legal distinction between the business and its owner there is a distinction between the business and its owner for accounting purposes there is a legal distinction between the business and its owner
A&B - CORRECT ANSWERS ✔✔A&B: There is no legal distinction between the business and its owner, but there is a distinction between the two for accounting purposes Elson Inc estimated the useful life of a patent and amortized it over its useful life. This GAAP is known as: monetary concept matching economic entity going concern none - CORRECT ANSWERS ✔✔Matching Presenting an asset in the balance sheet at its historical cost less accumulated depreciation is an example of: managerial accounting tax accounting financial accounting none - CORRECT ANSWERS ✔✔Financial accounting The quality that assumes that information is reasonably free from error is relevant conservatism
statement of retained earning none - CORRECT ANSWERS ✔✔balance sheet Which of the following statements represents a flow concept? Balance sheet statement of retained earnings inventory statement none - CORRECT ANSWERS ✔✔none Arrow Inc was incorporated in 1904. Land was purchased at that time for $10,000. This same land would be carried on the balance sheet of Arrow, Inc in 2004 as $10,000. T/F - CORRECT ANSWERS ✔✔True Which of the following accounts represents the original investment of the shareholders? Capital stock Retained earnings Liabilities Assets None - CORRECT ANSWERS ✔✔Capital Stock The balance maintained in a checking account (also called a demand deposit or DDA account) is considered a part of a company's cash account. T/F - CORRECT ANSWERS ✔✔True
Which of the following is a snapshot of the financial position of the company? Income statement statement of retained earnings cash flow statement inventory statement none - CORRECT ANSWERS ✔✔None - balance sheet Prepaid items have already been converted to cash and therefore are the most liquid items in the current assets portion go the balance sheet. T/F - CORRECT ANSWERS ✔✔FALSE Blueline Inc had $10,000 in credit sales. The credit entry is to: Retained earnings Accounts payable Accounts receivable Cash non - CORRECT ANSWERS ✔✔Retained earnings Total debits = total credits T/F - CORRECT ANSWERS ✔✔True Redstone Inc borrows $10,000 from the bank. The terms of the note are 90 days at a 10% interest rate. Redstone debits:
none - CORRECT ANSWERS ✔✔credit taxes payable The accounting process is concerned only with the external transactions representing economic events T/F - CORRECT ANSWERS ✔✔False The adjusting entry that is made at the end of the accounting period with respect to interest on a note credits: an asset account a liability account an owners equity account both b and c none - CORRECT ANSWERS ✔✔A liability account Although dividends are not an expense of a company, they still impact retained earning T/F - CORRECT ANSWERS ✔✔True Whitestone Company collected $10,000 on a credit sale. The left hand side of the entry would be a debit to: accounts receivable accounts payable cash owners equity none - CORRECT ANSWERS ✔✔cash
Which of the following is a source of cash? increase in accounts receivable increase in inventories decrease in accounts payable decrease in accounts payable none - CORRECT ANSWERS ✔✔none Which of the following decreases cash? increase in accounts receivable increase in inventories decrease in accounts payable none - CORRECT ANSWERS ✔✔none Which of the following decreases cash? increase in accounts receivable
none - CORRECT ANSWERS ✔✔decrease If a company pays out less than the costs incurred, the effect on cash is a: decrease increase no effect none - CORRECT ANSWERS ✔✔increase Non-cash expenses include the amortization of intangibles T/F - CORRECT ANSWERS ✔✔True Depreciation is added back to net income because depreciation is a non-cash expense T/F - CORRECT ANSWERS ✔✔True What is the impact on cash of purchasing inventory on 60 day credit: cash increases cash decreases no effect on cash none - CORRECT ANSWERS ✔✔no effect on cash Net income includes any gains from the sale of equipment T/F - CORRECT ANSWERS ✔✔True
An accounting entity is considered to be any organization for which separate accounting data is gathered and processed T/F - CORRECT ANSWERS ✔✔True Accounting is a set of rules and methods by which economic information of a business is collected and made into reports that are useful to end users. T/F - CORRECT ANSWERS ✔✔TRUE When the bookkeeper of accountant of a business entity records an economic event, it is called a: record transaction balance - CORRECT ANSWERS ✔✔Transaction CPA stands for certified private accountant T/F - CORRECT ANSWERS ✔✔FALSE - it stands for certified public accountant When the owner of a proprietorship or one of the partners of a partnership dies, the business ceases to exist T/F - CORRECT ANSWERS ✔✔TRUE The area of financial accounting is designed for the ______ type of user. - CORRECT ANSWERS ✔✔external The area of tax accounting is designed for the _____ type of user. - CORRECT ANSWERS ✔✔government
mathematically integrating various economic and political models - CORRECT ANSWERS ✔✔providing relevant economic info on costs and expected profits Bookkeeping is a: communication system measuring and recoding system dull and tedious job suited only for small, wiry med with word rim glasses and green eyeshades system for recoding illegal bets by gamblers - CORRECT ANSWERS ✔✔measuring and recording system Financial accounting, like managerial accounting, has no firm guidelines that it must follow T/F - CORRECT ANSWERS ✔✔False Congress has authorized the SEC to govern the financial reporting of public corporations T/F - CORRECT ANSWERS ✔✔TRUE Large corporations, like GM, are required to round off their figures to the nearest million dollars on their financial reports T/F - CORRECT ANSWERS ✔✔FALSE The statement of retained earnings shows the revenues, expenses and net income of an enterprise over a period of time T/F - CORRECT ANSWERS ✔✔FALSE -
it lists the beginning balance in retained earnings, to which net income for the period are added and dividends paid during the same time period are deducted The statement of financial position shows how well a company has performed over a period of time T/F - CORRECT ANSWERS ✔✔False - the statement of financial position (aka the balance sheet) lists a company's assets, liabilities, and owners equity Liabilities = assets -owners equity T/F - CORRECT ANSWERS ✔✔TRUE The net worth of a firm is shown on the company's balance sheet T/F - CORRECT ANSWERS ✔✔True The operating expenses shown on an income statement usually include ____ cost of goods sold salaries administration - CORRECT ANSWERS ✔✔salaries and administration Liabilities are the claims of creditors to a company's resources T/F - CORRECT ANSWERS ✔✔True Stockholders equity is the same as owners equity T/F - CORRECT ANSWERS ✔✔TRUE Current assets almost always equal current liabilities T/F - CORRECT ANSWERS ✔✔FALSE
The money spent to buy equipment is called an expense T/F - CORRECT ANSWERS ✔✔FALSE - money spent to bu equipment is called capital expenditure; each year a portion of the cost of equipment is charged against income in the form of depreciation expense Owners equity can also be shown on the balance sheet as ____ net worth net assets stockholders equity - CORRECT ANSWERS ✔✔net worth, assets, and stockholder's equity Dividends can be paid to stockholders only following a year in which a company has generated net income T/F - CORRECT ANSWERS ✔✔False - a company can pay dividends any time its board of directors chooses Depreciation can be considered an allocated cost of using an asset with a life of more than a year T/F - CORRECT ANSWERS ✔✔True - depreciation is a process of systematically and rationally allocating the cost of an asset over its useful life One purpose of the statement of retained earnings is to show _____. - CORRECT ANSWERS ✔✔distribution of earnings to the stockholders T-accounts are called such because they resemble the shape of a T. T/F - CORRECT ANSWERS ✔✔TRUE
Increases in t-accounts are always shown on the right-hand side T/F - CORRECT ANSWERS ✔✔FALSE - "A=L+O"; asset accounts: L-H increase, R-H decrease liability accounts: L-H decrease, R-H increase owner's equity: L-H decrease, R-H increase The total of all the right-hand sides of the t-accounts must equal the total of all the eft-hand sides of the t-accounts T/F - CORRECT ANSWERS ✔✔TRUE Financial analysts interpret historical financial data in order to better predict the future performance of the reporting entity. T/F - CORRECT ANSWERS ✔✔TRUE Ratio analysis is unqualifiedly the best method of financial statement analysis T/F - CORRECT ANSWERS ✔✔False Profit margin provides the user with a comprehensive profit picture of a firm T/F - CORRECT ANSWERS ✔✔FALSE Current ratios and quick ratios indicate the relative liquidity of a company. These two ratios are essential in that they provide an analyst with information concerning a company's ability to meet its current obligations - CORRECT ANSWERS ✔✔True
