Exam 17: Understanding Accounting and Financial Information

Preferred Pet Care,Inc. ,has recorded the following on its income statement for the period ending,December 31,2014: The return on sales = 34%.This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry.

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

Liquidity refers to how fast an asset can be converted to cash.

Although a firm may use different inventory valuation methods,generally accepted accounting principles (GAAP)states that these methods must produce the same dollar value for the cost of goods sold.

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: If 25% of their net income is paid to the government in taxes,what is their net income after taxes?

Benjamin works in the accounting department for a textbook publishing firm preparing budgets and reporting production costs.He is a:

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

The Barkley Company's balance sheet shows: what the business owns,minus what the business owes,equals the book value (or,net worth)of the business.

A(n)_________ is a yearly published statement of the financial condition,progress and expectations of an organization.

Which of the following is an example of a financial transaction?

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

The three important financial statements prepared by accountants are:

Bookkeeping is part of the accounting cycle,but accounting goes far beyond the activities involved in bookkeeping.

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

Becky Hunter is an accountant employed by FAF Enterprises.Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets.Becky is a:

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

During a period of rising prices,using FIFO (first in,first out)inventory valuation method will result in ________ net income figures than would LIFO (last in,first out).

The income statement computes net income by subtracting liabilities from assets.

A firm's financial statements represent a health report regarding the condition of the firm.

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.