Question 1

At present,accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

Accepted Answer

A) True 
 B)False

Question 2

The Sarbanes-Oxley Act prohibits accounting firms from providing certain non-auditing work (such as consulting services)to companies they audit.

Accepted Answer

A) True 
 B)False

Question 3

__________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock,stock options,warrants and convertible debt securities are also taken into account.

Accepted Answer

A)  Basic 
B)  Diluted 
C)  Restricted 
D)  Broad-based 
A)  Basic 
B)  Diluted 
C)  Restricted 
D)  Broad-based

Question 4

Derek has a bachelor's degree in accounting and additional training in tax law.He is responsible for preparing tax returns and developing tax strategies for his employer,and has done so for the past seven years.Derek is a certified government accountant.

Accepted Answer

A) True 
 B)False

Question 5

One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions.

Accepted Answer

A) True 
 B)False

Question 6

In large companies,certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses.

Accepted Answer

A) True 
 B)False

Question 7

Perry is responsible for recording sales transactions at Turncoat Enterprises.Perry's company utilizes _____________________,to help minimize entry errors.

Accepted Answer

A)  auditing 
B)  capital budgeting 
C)  double-entry bookkeeping 
D)  revenue assessment 
A)  auditing 
B)  capital budgeting 
C)  double-entry bookkeeping 
D)  revenue assessment

Question 8

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 9

Marshall McBride inherited $10,000 from his Great Aunt Martha.He invested $5,000 in a new,risky start-up venture,10th Generation,Inc. ,and the other $5,000 in Major Chemicals,Inc,a well-known chemical company that's been around for years.Today,his financial planner called to inform him that the Return on Equity on 10th Generation = 6.28%;and,Return on Equity on Major Chemicals = 10.50%.Which of the following facts is important information for Marshall McBride?

Accepted Answer

A)  The return on equity on new companies is always lower than the return on equity of well established firms. 
B)  Investors willing to take added risk,expect higher returns. 
C)  Return on equity is a liquidity ratio that has very little bearing on profitability. 
D)  If Marshall wants to know how well his investments are performing,he should employ leverage ratios such as the debt to equity ratio. 
A)  The return on equity on new companies is always lower than the return on equity of well established firms. 
B)  Investors willing to take added risk,expect higher returns. 
C)  Return on equity is a liquidity ratio that has very little bearing on profitability. 
D)  If Marshall wants to know how well his investments are performing,he should employ leverage ratios such as the debt to equity ratio.

Question 10

Cindy is concerned because during the past four months her company has experienced difficulty in paying its bills on time.She knows if this continues,the firm will have difficulties in accomplishing its goals.Cindy is concerned with:

Accepted Answer

A)  asset disbursement. 
B)  cash flow. 
C)  profit and loss. 
D)  inventory valuation. 
A)  asset disbursement. 
B)  cash flow. 
C)  profit and loss. 
D)  inventory valuation.

Question 11

In businesses that handle a lot of perishable items (such as supermarkets)the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.

Accepted Answer

A) True 
 B)False

Question 12

The return on sales ratio measures a firm's use of leverage.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following ratios is a liquidity ratio?

Accepted Answer

A)  Inventory turnover ratio 
B)  Acid-test ratio 
C)  Debt to owners' equity ratio 
D)  Basic earnings per share 
A)  Inventory turnover ratio 
B)  Acid-test ratio 
C)  Debt to owners' equity ratio 
D)  Basic earnings per share

Question 14

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

Accepted Answer

A)  net income. 
B)  gross margin. 
C)  owners' equity. 
D)  cash reserves. 
A)  net income. 
B)  gross margin. 
C)  owners' equity. 
D)  cash reserves.

Question 15

An important difference between accounting and other business functions,such as marketing and management,is that:

Accepted Answer

A)  Accounting functions must be performed by an "outsider" (rather than by an employee of the business)in order to avoid conflicts of interest. 
B)  Accounting offers us insight into whether the business is financially sound. 
C)  Accounting involves mainly clerical activities and thus requires very little analysis. 
D)  Accounting deals exclusively with numbers. 
A)  Accounting functions must be performed by an "outsider" (rather than by an employee of the business)in order to avoid conflicts of interest. 
B)  Accounting offers us insight into whether the business is financially sound. 
C)  Accounting involves mainly clerical activities and thus requires very little analysis. 
D)  Accounting deals exclusively with numbers.

Question 16

Accounting provides financial information that can be useful to owners,creditors,suppliers,employees,and competitors of an organization.

Accepted Answer

A) True 
 B)False

Question 17

The cost of goods sold reflects the selling price of the merchandise sold over a period of time.

Accepted Answer

A) True 
 B)False

Question 18

The books where accounting data are first entered are called ledgers.

Accepted Answer

A) True 
 B)False

Question 19

The balance sheet is composed of the following types of accounts:

Accepted Answer

A)  Revenue,expenses,and earnings. 
B)  Operating expenses,cash flow,and capital expenditures. 
C)  Capital,cost,and valuation. 
D)  Assets,liabilities,and owners' equity. 
A)  Revenue,expenses,and earnings. 
B)  Operating expenses,cash flow,and capital expenditures. 
C)  Capital,cost,and valuation. 
D)  Assets,liabilities,and owners' equity.

Question 20

The Barkley Company is a fast growing start-up.The accountant calculated earnings per share = $.13.This information will provide him/her with insight into the firm's ability to pay dividends.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

At present,accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

The Sarbanes-Oxley Act prohibits accounting firms from providing certain non-auditing work (such as consulting services)to companies they audit.

__________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock,stock options,warrants and convertible debt securities are also taken into account.

Derek has a bachelor's degree in accounting and additional training in tax law.He is responsible for preparing tax returns and developing tax strategies for his employer,and has done so for the past seven years.Derek is a certified government accountant.

One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions.

In large companies,certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses.

Perry is responsible for recording sales transactions at Turncoat Enterprises.Perry's company utilizes _____________________,to help minimize entry errors.

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.

Cindy is concerned because during the past four months her company has experienced difficulty in paying its bills on time.She knows if this continues,the firm will have difficulties in accomplishing its goals.Cindy is concerned with:

In businesses that handle a lot of perishable items (such as supermarkets)the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.

The return on sales ratio measures a firm's use of leverage.

Which of the following ratios is a liquidity ratio?

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

An important difference between accounting and other business functions,such as marketing and management,is that:

Accounting provides financial information that can be useful to owners,creditors,suppliers,employees,and competitors of an organization.

The cost of goods sold reflects the selling price of the merchandise sold over a period of time.

The books where accounting data are first entered are called ledgers.

The balance sheet is composed of the following types of accounts:

The Barkley Company is a fast growing start-up.The accountant calculated earnings per share = $.13.This information will provide him/her with insight into the firm's ability to pay dividends.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics 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

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

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 A: Using Technology to Manage Information

Appendix B: Managing Risk

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