Exam 7: Accounting: Decision Making by the Numbers

Profit is the difference between which of the following?

Which of the following would provide reports, information, and analysis to managers to assist them with making better informed decisions?

The managers of a company are the only stakeholders of a company that have a legitimate interest in its accounting information.

Forensic accountants combine their knowledge of accounting with investigative skills.

For what purpose would employees be most likely to use their employer's accounting information?

Generally accepted accounting principles (GAAP) are a set of accounting standards used in the preparation of financial statements.

Auditors check the accuracy of every accounting transaction; especially in large, public companies.

Wages paid to workers is an example of implicit or opportunity costs.

Horizontal analysis compares the balance sheet in a given year to the income statement and statement of cash flows in that same year to ensure that these three statements contain consistent information.

Mason owns stock in Munnymacher Inc. and wants to see if he can identify any trends in its financial performance over the past few years. What would he therefore want to perform?

Explain how horizontal analysis can provide management with insights into a firm's financial performance.

Which of the following is normally the first asset listed on a balance sheet?

Samantha is an accounting major who has been disturbed by all of the recent accounting scandals. She has decided to dedicate her career to catching those involved in embezzlement, securities fraud, money laundering, and other white collar crimes. What should she train to become?

When financial managers are concerned about the ability to pay off debts that will come due in the next year, which of the following are they likely to focus on?

According to the accrual basis of accounting, how are expenses treated?

Liabilities could include bank loans and current payments owed to suppliers.

Since it deals strictly with numbers, the practice of accounting is free from ethical considerations.

A balance sheet is a financial statement reporting the financial position of a firm at a particular point in time by identifying and reporting the value of the firm's assets, liabilities, and owners' equity.

Which ratio measures the ability of an organization to convert assets into the cash it needs to pay off liabilities that come due in the next year?

The owners' equity section of the balance sheet indicates the claims a firm's owners have against their company's assets.