Exam 16: Understanding Accounting and Financial Information

Both the current ratio and the acid-test ratio are liquidity ratios.

Leondra works for a textbook publishing firm preparing budgets and reporting production costs.She works in the field of:

If you know how to keep your customers satisfied,you can successfully manage a business without knowing anything about accounting.

Although a firm may use different inventory valuation methods,generally accepted rules of accounting state that these methods must produce the same dollar value when used to determine the cost of goods sold.

During a period of rising prices,the FIFO technique of inventory valuation will result in a lower net income figure than would the LIFO technique.

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

The value of what stockholders own in a firm is called stockholders' equity.

ABC Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

The key financial statements are the balance sheet,income statement,and cash flow statement.

The main reason an accountant would conduct a trial balance would be to:

Retailers attempt to sell older merchandise before more recently acquired merchandise is sold.The assumptions made by the _______ method of inventory valuation are most consistent with this approach.

Accounting recognizes that assets,such as machinery and buildings,lose value over time.Accountants will record a portion of the cost of an asset as an expense each year through the use of:

Brand names such as Coca-Cola and McDonald's are examples of fixed assets.

Computers today can actually record and analyze data,in addition to printing financial reports.

Expenses are what the business owes to others.