Exam 17: Understanding Accounting and Financial Information

General expenses include office salaries, rent, and insurance.

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

During a period of rising prices, the FIFO technique of inventory valuation will result in a lower net income figure than would the LIFO technique.

Skilled professionals who are responsible for the development of strategies to minimize taxes are called:

measures the amount of profit earned by a company for each share of outstanding common stock.

As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information: Peak Performance's debt to owners equity ratio (rounded to the nearest tenth of a percent) is:

Courtney McRae started the Row-Your-Boat paddle boat and row boat business at a nearby lake resort. She wanted to combine her accounting degree with her love of the outdoors and fishing. One of her first business purchases was a computerized accounting system. She learned in her college classes that a good software system will eliminate accounting cycle steps and the time it takes for her interpret the results. As she put it, "It should make the decisions for me!"

Mike is the head of the accounting department at Micro flash. After completing the trial balance, he will proceed with the preparation of the balance sheet, the income statement and the statement of cash flows.

The purpose of a trial balance is to prepare a practice balance sheet.

Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered and/or from other revenue sources.

Jamal is an accountant employed full-time by The Barkley Company. Jamal is an example of a public accountant.

A hospital emergency room serves several patients from a ten car pile-up on the local interstate. Most of the victims require bandages, antibiotics, foot and arm casts, topical ointments, and pain pills. These items are part of the costs of good sold for the hospital emergency room.

Activities of managerial accountants include measuring and reporting the costs of production, marketing and other functions within the organization.

The most liquid asset is:

Double-entry bookkeeping requires that every transaction be recorded in two places.

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

Cash flow statements identify three sources of cash receipts and disbursements: Assets, liabilities and owners' equity.

Financial ratios are used to analyze a firm's financial condition and financial performance.

During periods of rising prices, firms that want to report more attractive profits would tend to favor the FIFO technique of inventory valuation.

A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.