Question 1

If a firm has a debt to owners' equity ratio of .54 (or 54%)we can conclude that:

Accepted Answer

A)  It has relied more on debt than equity to finance its operations. 
B)  The firm is likely to have trouble paying its short term debts when they come due. 
C)  Its total liabilities are less than its owners' equity. 
D)  The firm has expenses that are exactly 54% of its gross profit. 
A)  It has relied more on debt than equity to finance its operations. 
B)  The firm is likely to have trouble paying its short term debts when they come due. 
C)  Its total liabilities are less than its owners' equity. 
D)  The firm has expenses that are exactly 54% of its gross profit.

Question 2

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Accepted Answer

A) True 
 B)False

Question 3

Net Profit refers to:

Accepted Answer

A)  The result of deducting liabilities from the assets of the firm. 
B)  The result of subtracting cost of good sold from revenues. 
C)  The result of deducting depreciation expense from revenues. 
D)  The net earnings after the deduction of all expenses,including tax expense. 
A)  The result of deducting liabilities from the assets of the firm. 
B)  The result of subtracting cost of good sold from revenues. 
C)  The result of deducting depreciation expense from revenues. 
D)  The net earnings after the deduction of all expenses,including tax expense.

Question 4

Generally the higher the risk involved in an activity,the ________ the rate of return expected by investors.

Accepted Answer

A)  higher 
B)  lower 
C)  more stable 
D)  less frequent 
A)  higher 
B)  lower 
C)  more stable 
D)  less frequent

Question 5

The "bottom line" of an income statement shows the firm's:

Accepted Answer

A)  Retained earnings. 
B)  Gross profit. 
C)  Net income or net loss. 
D)  Owners' equity. 
A)  Retained earnings. 
B)  Gross profit. 
C)  Net income or net loss. 
D)  Owners' equity.

Question 6

Which of the following agencies would have the greatest impact on the methods used to record,classify,summarize,and interpret accounting information for the State of Kentucky's Department of Transportation?

Accepted Answer

A)  Commission on Accounting Practices for State Governments 
B)  Government Accounting Standards Board 
C)  Independent Not-For-Profit Accounting Standards Board 
D)  Institute for Public Sector Accounting Standards 
A)  Commission on Accounting Practices for State Governments 
B)  Government Accounting Standards Board 
C)  Independent Not-For-Profit Accounting Standards Board 
D)  Institute for Public Sector Accounting Standards

Question 7

A(n)__________ provides accounting services to individuals or firms on a fee basis.

Accepted Answer

A)  contract accountant 
B)  account agent 
C)  public accountant 
D)  independent accountant 
A)  contract accountant 
B)  account agent 
C)  public accountant 
D)  independent accountant

Question 8

_______ refers to the value that stockholders or owners have in a company.

Accepted Answer

A)  Assets 
B)  Liabilities 
C)  Owners' equity 
D)  Contra receivables 
A)  Assets 
B)  Liabilities 
C)  Owners' equity 
D)  Contra receivables

Question 9

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ____________."

Accepted Answer

A)  Managers within the firm,exclusively 
B)  Marketing research firms for pricing insights 
C)  Primarily the IRS and other government agencies that regulate the firm 
D)  Managers,owners,creditors,employees,and the government 
A)  Managers within the firm,exclusively 
B)  Marketing research firms for pricing insights 
C)  Primarily the IRS and other government agencies that regulate the firm 
D)  Managers,owners,creditors,employees,and the government

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Liquidity refers to how quickly liabilities must be paid.

Accepted Answer

A) True 
 B)False

Question 12

Given that measuring a firm's financial health is important to its survival,which of the following strategies is good advice for a person just starting a business?

Accepted Answer

A)  Create a method for keeping your books that makes sense to you.Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books. 
B)  All transactions are important.Separating transactions only serves to create a perception that some transactions are of lesser importance than others. 
C)  Accounting systems used by big business are not suitable for small businesses. 
D)  Select an accounting system that helps you make decisions,and helps you report information to others outside your firm. 
A)  Create a method for keeping your books that makes sense to you.Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books. 
B)  All transactions are important.Separating transactions only serves to create a perception that some transactions are of lesser importance than others. 
C)  Accounting systems used by big business are not suitable for small businesses. 
D)  Select an accounting system that helps you make decisions,and helps you report information to others outside your firm.

Question 13

A company's income statement is important to accountants and other stakeholders.It reveals:

Accepted Answer

A)  A company's sources of funding. 
B)  A company's ability to distribute goods or services in a timely manner. 
C)  A company's ability to earn a profit over time. 
D)  A company's capitalized value. 
A)  A company's sources of funding. 
B)  A company's ability to distribute goods or services in a timely manner. 
C)  A company's ability to earn a profit over time. 
D)  A company's capitalized value.

Question 14

Bob Stewart plans to visit his financial planner today to discuss investment strategy.As a young,"20 something" accountant,he knows he can afford to invest in a few riskier investments.Which of the following ratios will be an important measure of profitability for Bob?

Accepted Answer

A)  Return on sales 
B)  Return on equity 
C)  Inventory turnover 
D)  Acid test ratio 
A)  Return on sales 
B)  Return on equity 
C)  Inventory turnover 
D)  Acid test ratio

Question 15

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

Accepted Answer

A) True 
 B)False

Question 16

Peak Performance Sporting Goods Company competes with several other firms in the retail industry for important visibility and retail space in large stores.The company's chief financial officer knows that in order to attract investors,the company must demonstrate growth,and its management must outperform the competition.The CFO continuously watches __________________ because these are key to measuring growth.

Accepted Answer

A)  activity ratios 
B)  profitability ratios 
C)  leverage ratios 
D)  liquidity ratios 
A)  activity ratios 
B)  profitability ratios 
C)  leverage ratios 
D)  liquidity ratios

Question 17

Bark Three Times Pet Store's accountant has recorded the following: Total current assets = $60,000,including Cash = $24,000;Accounts Receivable = $20,000;and,Inventory = $16,000.Total assets = $230,000;Total current liabilities = $48,000;and,Total current and long-term liabilities = $98,000.The store's current ratio = 1.25.The store's acid-test ratio = .92

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

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

Accepted Answer

A) True 
 B)False

Question 20

Ralph owns a small business.Some friends have suggested that he should switch from his current manual accounting system to one that is computerized.Ralph is not certain he wants to use computers in his small firm's accounting system.He is concerned about the time it would take to learn the system,and wonders whether the benefits will justify the costs of setting up the system.As a small business owner,Ralph would probably find that:

Accepted Answer

A)  Computer software tends to be very helpful to small business owners who lack strong accounting support within their companies. 
B)  Today's accounting software tends to be very complex,so only people with extensive accounting experience can understand its features and use it effectively. 
C)  Even though it is not yet cost effective,he should go ahead and adopt a computerized system,because government regulations will require most business functions to be computerized in the near future. 
D)  Such systems actually reduce costs,because they eliminate the need to consult with an accountant. 
A)  Computer software tends to be very helpful to small business owners who lack strong accounting support within their companies. 
B)  Today's accounting software tends to be very complex,so only people with extensive accounting experience can understand its features and use it effectively. 
C)  Even though it is not yet cost effective,he should go ahead and adopt a computerized system,because government regulations will require most business functions to be computerized in the near future. 
D)  Such systems actually reduce costs,because they eliminate the need to consult with an accountant.

If a firm has a debt to owners' equity ratio of .54 (or 54%)we can conclude that:

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Net Profit refers to:

Generally the higher the risk involved in an activity,the ________ the rate of return expected by investors.

The "bottom line" of an income statement shows the firm's:

Which of the following agencies would have the greatest impact on the methods used to record,classify,summarize,and interpret accounting information for the State of Kentucky's Department of Transportation?

A(n)__________ provides accounting services to individuals or firms on a fee basis.

_______ refers to the value that stockholders or owners have in a company.

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ____________."

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

Liquidity refers to how quickly liabilities must be paid.

Given that measuring a firm's financial health is important to its survival,which of the following strategies is good advice for a person just starting a business?

A company's income statement is important to accountants and other stakeholders.It reveals:

Bob Stewart plans to visit his financial planner today to discuss investment strategy.As a young,"20 something" accountant,he knows he can afford to invest in a few riskier investments.Which of the following ratios will be an important measure of profitability for Bob?

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

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

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

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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Exam 17: Understanding Accounting and Financial Information

If a firm has a debt to owners' equity ratio of .54 (or 54%)we can conclude that:

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Net Profit refers to:

Generally the higher the risk involved in an activity,the ________ the rate of return expected by investors.

The "bottom line" of an income statement shows the firm's:

Which of the following agencies would have the greatest impact on the methods used to record,classify,summarize,and interpret accounting information for the State of Kentucky's Department of Transportation?

A(n)__________ provides accounting services to individuals or firms on a fee basis.

_______ refers to the value that stockholders or owners have in a company.

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ____________."

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

Liquidity refers to how quickly liabilities must be paid.

Given that measuring a firm's financial health is important to its survival,which of the following strategies is good advice for a person just starting a business?

A company's income statement is important to accountants and other stakeholders.It reveals:

Bob Stewart plans to visit his financial planner today to discuss investment strategy.As a young,"20 something" accountant,he knows he can afford to invest in a few riskier investments.Which of the following ratios will be an important measure of profitability for Bob?

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

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

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

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

Filters