Exam 11: Understanding Accounting

Retained earnings are net profits minus dividend payments to stockholders.

Financial accounting is the field of accounting concerned with external users of a company's financial information. the rules and procedures governing the content and form of financial reports. a systematic examination of a company's accounting system to determine whether its financial reports fairly represent its operations. a bookkeeping system that balances the accounting equation by recording the dual effects of every financial transaction. a field of accounting that serves internal users of a company's financial information.

Jack wants to compare Algoma Steel and Defasco's earnings per share. Which formula would Jack use? Net income divided by the market value of the common shares. Net income divided by the market value of the preferred shares. Total assets divided by number of common and preferred shares outstanding. Total assets divided by value of common shares outstanding. Net income divided by number of common shares outstanding.

Gross profit percentages don't vary much across industries, with most companies making about 6 percent.

Gross profit margin is calculated by subtracting the cost of goods sold from revenue.

The Mainline Corporation's gross profit was $5 million, its net income was $2 million, and operating expenses were $1 million. Its owners' equity is $100 million. Its return on equity is therefore two percent.

Current liabilities consisting of bills owed to suppliers plus wages and taxes due within the upcoming year are known as accounts receivable. accounts payable. prepaid expenses. marketable securities. net liabilities.

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 Streeter & Sons has too much debt? The company has grown only slowly since its beginning. The company's customer base has steadily increased in the last few years. The company is out-competing other similar companies in the area. The company's current liabilities are higher than its current and fixed assets. The company has built up a substantial amount of owners' equity.

Barry is a private accountant who is working through the accounting cycle. He has already analyzed transaction documents. His next step is to record transactions in a journal. do a trial balance. prepare financial statements. analyze the financial statements using ratio analysis. transfer entries from the journal to the ledger.

To compute the current ratio, current assets are divided by debt. current liabilities. long-term assets. owners' equity. quick assets.

A(n) _____ ratio estimates the risk associated with investing in a firm. financial solvency managerial activity none of these

What are the three types of assets that will typically be found on a balance sheet? Local, national, and international Positive, negative, and neutral Land, buildings, and equipment Current, fixed, and intangible Short-term, long-term, and medium-term

________ are rules and procedures governing the content and form of financial reports. Accounting society rules Generally Accepted Accounting Principles (GAAP) National guidelines The Auditor's Bible The Rules of the Road

Gem Corp. has $100 million in assets and $50 million in liabilities. Last year, the company earned $10 million in net profit and paid out $5 million in dividends to shareholders. What are the retained earnings for the company? $50 million $5 million $45 million $90 million $95 million

Financial statements fall into three broad categories, which are debits, credits, and loans. income statements, balance sheets, and statements of cash flows. assets, liabilities, and owners' equity. cash, marketable securities, and goodwill. budgets, income statements, and profit-and-loss statements.

What services do CAs and CGAs provide? Provide a brief explanation of each service.

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 is the company's gross profit? $6 million $17 million $16 million $2 million None of these

The financial statement detailing a firm's assets, liabilities, and owners' equity is the income statement. statement of cash flows. balance sheet. manufacturing statement. statement of retained earnings.

Which of the following is correct with respect to generally accepted accounting principles? Public and private businesses can no longer use generally accepted accounting principles. They are used in many foreign countries but not in Canada. Public companies in Canada have moved away from using generally accepted accounting principles and have adopted adopted International Financial Reporting Standards (IFRS). Private companies must use the new International Financial Reporting Standards (IFRS). None of these statements are correct.

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