Question 1

The inventory turnover ratio for all firms should be greater than 2 times.

Accepted Answer

A) True 
 B)False

Question 2

The ________ shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time.

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  statement of cash flows 
D)  trial balance 
A)  income statement 
B)  balance sheet 
C)  statement of cash flows 
D)  trial balance

Question 3

Accounting transactions are very important to a firm's operations. Which of the following activities would affect the firm's account balances?

Accepted Answer

A)  buying and selling goods and services 
B)  interviewing prospective employees 
C)  understanding economic reports 
D)  forecasting consumer demand 
A)  buying and selling goods and services 
B)  interviewing prospective employees 
C)  understanding economic reports 
D)  forecasting consumer demand

Question 4

Revenue, minus cost of goods sold =

Accepted Answer

A)  retained earnings. 
B)  fundamental accounting equation. 
C)  gross profit. 
D)  net income. 
A)  retained earnings. 
B)  fundamental accounting equation. 
C)  gross profit. 
D)  net income.

Question 5

A lower than average inventory turnover ratio indicates excellent inventory management practices.

Accepted Answer

A) True 
 B)False

Question 6

During a period of rising prices, if a firm desires to report a low gross profit figure in hopes of reducing their income tax liability, the firm will use the ________ inventory valuation method.

Accepted Answer

A)  FIFO (first-in, first-out) 
B)  LIFO (last-in, first-out) 
C)  sliding scale 
D)  average cost 
A)  FIFO (first-in, first-out) 
B)  LIFO (last-in, first-out) 
C)  sliding scale 
D)  average cost

Question 7

The three important financial statements prepared by accountants are

Accepted Answer

A)  ledger, journal, and trial balance. 
B)  cash budget, capital budget, and master budget. 
C)  revenue summary, expense summary, and consolidation statement. 
D)  balance sheet, income statement, and statement of cash flows. 
A)  ledger, journal, and trial balance. 
B)  cash budget, capital budget, and master budget. 
C)  revenue summary, expense summary, and consolidation statement. 
D)  balance sheet, income statement, and statement of cash flows.

Question 8

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 9

The U.S. government is a user of a firm's accounting information.

Accepted Answer

A) True 
 B)False

Question 10

According to generally accepted accounting principles (GAAP), a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory.

Accepted Answer

A) True 
 B)False

Question 11

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

Accepted Answer

A) True 
 B)False

Question 12

The Hendry Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities.

Accepted Answer

A) True 
 B)False

Question 13

Henderson, Inc. owns land worth $800,000 and has $180,000 worth of cash in its bank account. In the asset section of the balance sheet, Henderson lists its land holdings prior to listing its cash since it is a higher value.

Accepted Answer

A) True 
 B)False

Question 14

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

Accepted Answer

A) True 
 B)False

Question 15

As Jaime was packing to return to college after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a speaker system, and a Blu-ray player. An accountant would list all of these as Jaime's

Accepted Answer

A)  assets. 
B)  liabilities. 
C)  owners' equity. 
D)  intangibles. 
A)  assets. 
B)  liabilities. 
C)  owners' equity. 
D)  intangibles.

Question 16

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.

Accepted Answer

A) True 
 B)False

Question 17

Portable Pet Care, Inc., successfully took out a loan for $155,000 from Bigbux Bank. It used $90,000 of this loan to pay off an existing loan that had a higher interest rate, and purchased X-ray equipment with the remaining funds. These events were noted as financing and investing activities on its balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

The balance sheet is set up to reflect the Fundamental Accounting Equation. This equation shows

Accepted Answer

A)  Assets = Liabilities + Owners' equity. 
B)  Revenues - Expenses = Gross profit. 
C)  Cash inflows = Cash outflows. 
D)  Current assets + Current liabilities = Owners' equity. 
A)  Assets = Liabilities + Owners' equity. 
B)  Revenues - Expenses = Gross profit. 
C)  Cash inflows = Cash outflows. 
D)  Current assets + Current liabilities = Owners' equity.

Question 19

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

Accepted Answer

A) True 
 B)False

Question 20

Jerome is an accountant employed full time by The Newport Company. Jerome is an example of a public accountant.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

The inventory turnover ratio for all firms should be greater than 2 times.

The ________ shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time.

Accounting transactions are very important to a firm's operations. Which of the following activities would affect the firm's account balances?

Revenue, minus cost of goods sold =

A lower than average inventory turnover ratio indicates excellent inventory management practices.

During a period of rising prices, if a firm desires to report a low gross profit figure in hopes of reducing their income tax liability, the firm will use the ________ inventory valuation method.

The three important financial statements prepared by accountants are

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

The U.S. government is a user of a firm's accounting information.

According to generally accepted accounting principles (GAAP), a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory.

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

The Hendry Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities.

Henderson, Inc. owns land worth $800,000 and has $180,000 worth of cash in its bank account. In the asset section of the balance sheet, Henderson lists its land holdings prior to listing its cash since it is a higher value.

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

As Jaime was packing to return to college after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a speaker system, and a Blu-ray player. An accountant would list all of these as Jaime's

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.

The balance sheet is set up to reflect the Fundamental Accounting Equation. This equation shows

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

Jerome is an accountant employed full time by The Newport Company. Jerome is an example of a public accountant.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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