Exam 1: The Purpose and Use of Financial Statements

An advantage of the corporate form of business is that

The common characteristic possessed by all assets is

Financial statement users are interested in net income because it may be a predictor of future net income.

Potential employees who use annual reports to learn about the company and evaluate job prospects are regarded as external users.

Which of the following uses accounting information to determine whether a company's net income will result in a share price increase?

Retained earnings at the end of the period is equal to

The proprietorship form of business organization

Shareholders' equity can be described as claims of

Two internal users of accounting information are investors and managers.

The liability of corporate shareholders is limited to the amount of their investment.

Net income is another term for revenue.

Which of the following uses accounting information to determine whether a company can pay its obligations?

Economic resources that are owned by a business are called shareholders' equity.

A company's policy toward dividends and growth could best be determined by examining the

Any deficiency in cash from operating activities must be made up by issuing shares.

Which financial statement is prepared first?

If a company borrows funds and subsequently ceases operations,

The cost of assets consumed or services used is also known as a(n)

The issue of shares and distribution of dividends are used in determining net income.

Depreciation is the cost of certain long-lived assets allocated to expense for each period.