Exam 16: Understanding Accounting and Financial Information

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

As Canadian firms focus on cutting costs in order to stay competitive with producers in low-wage countries,______will gain importance.

Miko is the head of the accounting department at Microflush.She and her subordinates recently completed a trial balance.They are now likely to be working on the balance sheet,income statement and statement of cash flows.

The best way for a firm to avoid serious cash flow problems is to sustain a rapid growth in sales.

Inventory turnover is a(n)______ratio.

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

Budget preparation is one aspect of managerial accounting.

Juliet has found that her small business needs a better way to maintain accounting records and analyze business opportunities than its current manual system.These days,any off-the-shelf accounting package available at a local software retailer should do an excellent job of meeting her firm's accounting needs.

The acid-test ratio is found by dividing inventory by cost of goods sold.

Churches,schools,and charitable organizations all hire accountants.

Cash a firm raises from issuing new debt or equity capital would be reported on a statement of cash flows.

Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed.

Accounting is not important for non-profit organizations since financial data is generally not critical to their success.

Liquidity ratios are of particular importance to stockholders,but have little relevance for creditors.

Jose just graduated from college with a bachelor's degree in accounting.He plans to go to work for the Canadian Cancer Society as an accountant.Jose will be a(n):

The basic earnings per share and the diluted earnings per share would have quite different values for a firm that relied heavily on preferred stock and convertible debt securities to acquire funds.

Owners' equity can be found by subtracting liabilities from assets.

Which financial statement represents what the company owns and owes as of a specific date?

Resources that a firm owns are called:

The three key financial statements of a business are the: