Question 1

Leverage measures the ability of the firm to pay bills as they come due.

Accepted Answer

A) True 
 B)False

Question 2

Andy's line of credit with a local bank is likely a(n)

Accepted Answer

A) intangible asset. 
B) prepaid expense. 
C) current liability. 
D) account receivable. 
E) long-term liability. 
A) intangible asset. 
B) prepaid expense. 
C) current liability. 
D) account receivable. 
E) long-term liability.

Question 3

Streeter & Sons is a regional service company that has been in business for a few years,but has not employed a controller or anyone else full-time to keep track of its financial state.The company needs to take a good look at its financial state to determine whether it needs to make any changes in its practices,in order to prevent possible financial meltdown. Which of the following,if true,would strengthen the case that an income statement would show Streeter & Sons where its problems lie?

Accepted Answer

A) The company does not have enough shareholders. 
B) The company's expenses are too high. 
C) The company's owners' equity is too low. 
D) The company needs to hire more service specialists. 
E) The company has few intangible assets. 
A) The company does not have enough shareholders. 
B) The company's expenses are too high. 
C) The company's owners' equity is too low. 
D) The company needs to hire more service specialists. 
E) The company has few intangible assets.

Question 4

With fixed assets of $4 billion and current assets of $1.7 billion,Realm Company has long-term liabilities of $2 billion and current liabilities of $0.34 billion.What is Realm's current ratio?

Accepted Answer

A) 2 
B) 5 
C) 5.88 
D) 5.1 
E) 6.33 
A) 2 
B) 5 
C) 5.88 
D) 5.1 
E) 6.33

Question 5

If current assets are $10 000 and current liabilities are $5000,the current ratio is 0.5.

Accepted Answer

A) True 
 B)False

Question 6

Identify the profitability ratios and what they measure.

Accepted Answer

Profitability ratios give investors an i

Question 7

Aardvark is a small pest-control business that has 30 employees.The company started business within the past year and needs to decide on how best to manage its finances as the company continues to grow its customer base and its business. Which of the following,if true,would not strengthen the case for Aardvark's closely monitoring its cash flow?

Accepted Answer

A) The company needs to make sure it is not spending too much. 
B) The company needs to make sure it is generating enough revenue. 
C) The company needs to make sure its employees perform well. 
D) The company needs to make sure it can always pay its bills. 
E) The company needs to make sure it can make capital expenditures. 
A) The company needs to make sure it is not spending too much. 
B) The company needs to make sure it is generating enough revenue. 
C) The company needs to make sure its employees perform well. 
D) The company needs to make sure it can always pay its bills. 
E) The company needs to make sure it can make capital expenditures.

Question 8

A(n)________ ratio estimates the risk associated with investing in a firm.

Accepted Answer

A) financial 
B) solvency 
C) managerial 
D) activity 
E) none of these 
A) financial 
B) solvency 
C) managerial 
D) activity 
E) none of these

Question 9

Which of the following are measures of how efficiently a firm uses its resources?

Accepted Answer

A) Production ratio 
B) Activity ratio 
C) Quick ratio 
D) Turnover ratio 
E) Income ratio 
A) Production ratio 
B) Activity ratio 
C) Quick ratio 
D) Turnover ratio 
E) Income ratio

Question 10

A prepaid expense is

Accepted Answer

A) an expense,such as rent,that is paid before the upcoming period in which it is due. 
B) a nonphysical asset,such as a patent or trademark,that has economic value in the form of expected benefit. 
C) an amount due from a customer who has purchased goods on credit. 
D) an asset that can or will be converted to cash within the following year. 
E) an asset with long-term use or value,such as land,buildings,and equipment. 
A) an expense,such as rent,that is paid before the upcoming period in which it is due. 
B) a nonphysical asset,such as a patent or trademark,that has economic value in the form of expected benefit. 
C) an amount due from a customer who has purchased goods on credit. 
D) an asset that can or will be converted to cash within the following year. 
E) an asset with long-term use or value,such as land,buildings,and equipment.

Question 11

Sam's Smartphone Accessories Inc.(SMA)has fixed assets of $5 million,current assets of $2 million,long-term liabilities of $2 million,current liabilities of $1 million,and owners' equity of $2 million.What is SMA's debt-to-equity ratio?

Accepted Answer

A) 1.5 
B) 0.9 
C) 1.2 
D) 0.4 
E) 0.8 
A) 1.5 
B) 0.9 
C) 1.2 
D) 0.4 
E) 0.8

Question 12

Owners' equity is

Accepted Answer

A) the profits earned by and reinvested in the company. 
B) the amount of money that owners would receive if they sold all a firm's assets and paid all of its liabilities. 
C) the amount of money originally invested in a business by its owners. 
D) a debt owed by a firm to an outside organization or individual. 
E) any economic resource expected to benefit a firm or an individual who owns it. 
A) the profits earned by and reinvested in the company. 
B) the amount of money that owners would receive if they sold all a firm's assets and paid all of its liabilities. 
C) the amount of money originally invested in a business by its owners. 
D) a debt owed by a firm to an outside organization or individual. 
E) any economic resource expected to benefit a firm or an individual who owns it.

Question 13

A company's owners invested $10 000 total into the company,which made a profit of $3500 last year.Its total liabilities are currently at $7000.What is the value of the total assets of this company?

Accepted Answer

A) $3000 
B) $3500 
C) $6500 
D) $13 500 
E) $27 500 
A) $3000 
B) $3500 
C) $6500 
D) $13 500 
E) $27 500

Question 14

Madeline wants to determine operating income for her company.To do so,she must subtract both the cost of goods sold and all operating expenses from gross sales revenue.

Accepted Answer

A) True 
 B)False

Question 15

An audit involves an examination of a firm's accounting system to determine whether the financial reports fairly present its financial operations.

Accepted Answer

A) True 
 B)False

Question 16

The accounting equation is

Accepted Answer

A) owners' equity - assets = liabilities. 
B) owners' equity - liabilities = assets. 
C) assets + liabilities = owners' equity. 
D) assets + owners' equity = liabilities. 
E) assets = liabilities + owners' equity. 
A) owners' equity - assets = liabilities. 
B) owners' equity - liabilities = assets. 
C) assets + liabilities = owners' equity. 
D) assets + owners' equity = liabilities. 
E) assets = liabilities + owners' equity.

Question 17

As buildings and equipment wear out or become obsolete,their value decreases.To reflect decreasing value,accountants use

Accepted Answer

A) prepaid expenses. 
B) licensing. 
C) subtracting methods. 
D) depreciation. 
E) all of these. 
A) prepaid expenses. 
B) licensing. 
C) subtracting methods. 
D) depreciation. 
E) all of these.

Question 18

What is the accounting term that describes an amount paid for an existing business above the value of its other assets?

Accepted Answer

A) A patent 
B) A copyright 
C) Goodwill 
D) A franchise fee 
E) Reputation 
A) A patent 
B) A copyright 
C) Goodwill 
D) A franchise fee 
E) Reputation

Question 19

The debt-to-equity ratio is calculated by dividing

Accepted Answer

A) current liabilities by owners' equity. 
B) total liabilities by owners' equity. 
C) long-term liabilities by retained earnings. 
D) total liabilities by retained earnings. 
E) long-term liabilities by owners' equity. 
A) current liabilities by owners' equity. 
B) total liabilities by owners' equity. 
C) long-term liabilities by retained earnings. 
D) total liabilities by retained earnings. 
E) long-term liabilities by owners' equity.

Question 20

Operating income is income before taxes are taken into account.

Accepted Answer

A) True 
 B)False

Leverage measures the ability of the firm to pay bills as they come due.

Andy's line of credit with a local bank is likely a(n)

With fixed assets of $4 billion and current assets of $1.7 billion,Realm Company has long-term liabilities of $2 billion and current liabilities of $0.34 billion.What is Realm's current ratio?

If current assets are $10 000 and current liabilities are $5000,the current ratio is 0.5.

Identify the profitability ratios and what they measure.

A(n)________ ratio estimates the risk associated with investing in a firm.

Which of the following are measures of how efficiently a firm uses its resources?

A prepaid expense is

Sam's Smartphone Accessories Inc.(SMA)has fixed assets of $5 million,current assets of $2 million,long-term liabilities of $2 million,current liabilities of $1 million,and owners' equity of $2 million.What is SMA's debt-to-equity ratio?

Owners' equity is

A company's owners invested $10 000 total into the company,which made a profit of $3500 last year.Its total liabilities are currently at $7000.What is the value of the total assets of this company?

Madeline wants to determine operating income for her company.To do so,she must subtract both the cost of goods sold and all operating expenses from gross sales revenue.

An audit involves an examination of a firm's accounting system to determine whether the financial reports fairly present its financial operations.

The accounting equation is

As buildings and equipment wear out or become obsolete,their value decreases.To reflect decreasing value,accountants use

What is the accounting term that describes an amount paid for an existing business above the value of its other assets?

The debt-to-equity ratio is calculated by dividing

Operating income is income before taxes are taken into account.

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship,small Business,and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating,satisfying,and Leading Employees

Operations Management,productivity,and Quality

Understanding Marketing Principles and Developing Products

Pricing,promoting,and Distributing Products

Money and Banking

Financial Decisions and Risk Management

Filters

Exam 11: Understanding Accounting

Leverage measures the ability of the firm to pay bills as they come due.

Andy's line of credit with a local bank is likely a(n)

With fixed assets of $4 billion and current assets of $1.7 billion,Realm Company has long-term liabilities of $2 billion and current liabilities of $0.34 billion.What is Realm's current ratio?

If current assets are $10 000 and current liabilities are $5000,the current ratio is 0.5.

Identify the profitability ratios and what they measure.

A(n)________ ratio estimates the risk associated with investing in a firm.

Which of the following are measures of how efficiently a firm uses its resources?

A prepaid expense is

Sam's Smartphone Accessories Inc.(SMA)has fixed assets of $5 million,current assets of $2 million,long-term liabilities of $2 million,current liabilities of $1 million,and owners' equity of $2 million.What is SMA's debt-to-equity ratio?

Owners' equity is

A company's owners invested $10 000 total into the company,which made a profit of $3500 last year.Its total liabilities are currently at $7000.What is the value of the total assets of this company?

Madeline wants to determine operating income for her company.To do so,she must subtract both the cost of goods sold and all operating expenses from gross sales revenue.

An audit involves an examination of a firm's accounting system to determine whether the financial reports fairly present its financial operations.

The accounting equation is

As buildings and equipment wear out or become obsolete,their value decreases.To reflect decreasing value,accountants use

What is the accounting term that describes an amount paid for an existing business above the value of its other assets?

The debt-to-equity ratio is calculated by dividing

Operating income is income before taxes are taken into account.

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship,small Business,and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating,satisfying,and Leading Employees

Operations Management,productivity,and Quality

Understanding Marketing Principles and Developing Products

Pricing,promoting,and Distributing Products

Money and Banking

Financial Decisions and Risk Management

Filters