Exam 11: Understanding Accounting

Which of the following calculates the cost of goods sold during the period? Beginning inventory plus purchases minus ending inventory Ending inventory minus beginning inventory plus purchases Purchases minus beginning inventory plus ending inventory Beginning inventory plus ending inventory minus purchases (Ending inventory plus beginning inventory) divided by two

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

The inventory turnover ratio is calculated by dividing cost of goods sold by revenues. dividing average inventory by cost of goods sold. dividing revenues by cost of goods sold. dividing cost of goods sold by average inventory. dividing revenues by average inventory.

What is a statement of cash flows?

What is owners' equity?

Explain how the accounting equation and double-entry accounting are used in record keeping.

Who manages the entire firm's accounting activities? Venture capitalist Private accountant Controller Public (not chartered) accountant Auditor

The standard rules and methods used by accountants in preparing financial reports are called generally accepted accounting principles.

Under which condition is owners' equity negative? Credits exceed debits. Assets are greater than liabilities. Assets and liabilities are equal. Debits exceed credits. Liabilities are greater than assets.

David is an accountant who calls attention to problems and helps managers carry out the planning, decision making, and controlling functions. David is involved in ______ accounting. budgeting financial auditing managerial generally accepted accounting principles

How do accountants define merchandise inventory?

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

Identify the profitability ratios and what they measure.

Owners' equity consists of two sources: the amount that the owners originally invested, and profits earned by and reinvested in the company.

Arthur's primary responsibility as an auditor is publishing the audit report results in The Financial Post. preparing budgets for the forthcoming year. ensuring the firm's accounting practices adhere to generally accepted accounting principles. collecting taxes. determining that the company actually has the inventory that it says it has.

What are the three major classifications of ratios that are used to analyze financial statements? What is measured by each of these types of ratios?

At Lexi Corp., sales revenue is $20 million, the cost of goods sold is $14 million, operating expenses are $3 million, and income taxes are $1 million. What are retained earnings? $6 million $17 million $3 million $2 million It is not possible to tell with the information provided

If the following facts were known, which one would strengthen the argument that a company would be able to meet its current financial obligations? The level of accounts payable is high. Liabilities exceed assets. The company currently has a negative cash flow. The company needs to increase the number of customers it serves. Assets exceed liabilities.

If Eric wants to know the cost of obtaining materials to make products that were sold during the year, he would look at the income statement. statement of cash flows. operating expenses statement. balance sheet. none of these.

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