Exam 11: Understanding Accounting

Kershner says: "Our income statement should be looking good this year.We've been doing excellent business this year,so we have a lot of gross sales.The company should be in good shape." Michaels replies: "It remains to be seen how our income statement will look overall.Despite strong sales revenue,the overall income statement might not be as good as we might hope." Which of the following points out a flaw in Kershner's reasoning?

What is the purpose of an income statement? What important information is reflected in this statement?

To compute the current ratio,current assets are divided by

________ are purchased as short-term investments and are only slightly less liquid than cash.

What does the term "double-entry" accounting mean?

What purpose does the balance sheet serve?

What is an asset?

How is gross profit calculated?

What is a financial statement that describes a firm's generation and use of cash during a given period called?

List four trends that are contributing to additional roles for the modern accountant.

Mary Ann is considering buying an existing catering business that is up for sale.An auditor has found annual budgets for the catering business from the past few years.How can Mary Ann benefit from these?

If Eric wants to know the cost of obtaining materials to make products that were sold during the year,he would look at the

Describe how computing financial ratios can help users get more information from financial statements to determine the financial strengths of a business.

A CPA receives an operating licence from the federal government that must be renewed every three years.

Mary Ann is considering buying an existing catering business that is up for sale.The current owners claim that the business is highly profitable,but Mary Ann has her doubts.She also thinks that the price that they are asking seems high.In reviewing the financial statements of the catering business,she discovers that the current balance sheet shows that the business has more liabilities than assets.Why would this explain why the owners want to sell the business?

Manhattan Corporation has total assets of $700 000,total liabilities of $200 000,and owners' equity of $500 000.What is Manhattan Corporation's debt-to-equity ratio?

Which of the following is the ratio that is calculated by dividing net income by sales revenue?

The most important of all financial ratios is earnings per share.

What do forensic accountants do?

What is anything of economic value owned by a firm or individual called?