Exam 16: Understanding Accounting and Financial Information

As a bank loan officer,you are considering a loan application by Bama Bart's Sporting Goods.The company has provided you with its balance sheet and income statement,which contain the following information: the firm's only current assets are $25,000 in cash,$45,000 in accounts receivable,and $140,000 in inventory.It has no marketable securities.The firm also has $190,000 in fixed assets,but no intangible assets.It has $70,000 in current liabilities and its long-term liabilities are $90,000.By using some of this information,you can conclude that Bama Bart's current ratio is:

The top managers of Highbrow Bookstores want to indicate to the firm's shareholders how effectively they have managed the company.Perhaps the most meaningful way to do this would be by reporting strong:

The fundamental accounting equation states that assets equal __________.

Leverage ratios indicate the extent to which ________ has been used to fund a business' operations.

A(n)___________ provides a summary of money coming in to and money going out of a firm in a given time period.

If the total assets of a business are $107,000 and its liabilities are $75,000,which of the following statements is correct?

_________ refers to how fast an asset could be converted into cash.

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

The current ratio is found by dividing the firm's total assets by its total liabilities.

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

Which of the following ratios is a liquidity ratio?

A loan officer at the Saltwater State Bank is considering a loan application from Lanwell Mills.He is concerned about the ability of the company to make repayments if it grants the loan.The loan officer is likely to be very interested in Lanwell's statement of cash flows.

Accounting information is not relevant for nonprofit organizations.

April works in the accounting department at Henson's Tire & Auto.She is concerned that the company has been placing too many orders for office supplies and wants to look at all of the transactions involving the purchase of office supplies for the past several months.April could find such information by looking at the supplies account in the:

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

Which of the following refers to items that can be converted into cash within one year?

It is almost impossible to run a company effectively without the ability to read and understand basic accounting reports and financial statements.

A common mistake among start-ups is to focus on the product and not the running of the business.

The cash flow statement identifies three sources of cash receipts and disbursements: assets,liabilities and owners' equities.