Exam 7: Accounting: Decision Making by the Numbers

An income statement is the financial statement that reports revenues, expenses, and net income resulting from a firm's operations over an accounting period.

An example of a fixed cost would be the interest on a bank loan.

Explain three different opinions that may result from an accounting audit.

As the owner of 100 shares of Megabux Corporation's stock, Roman Sworski wants to know whether his company earned a profit or loss during the past year. He can find the answer to this by looking at which of the following of Megabux's financial statements?

Which type of accounting addresses the needs of managers, providing detailed reports to management with information that makes informed decision-making possible?

The balance sheet is organized to reflect the accounting equation. What is the accounting equation?

Fixed costs remain the same even when the firm changes its level of production.

Key users of a corporation's accounting information include managers, government agencies, and shareholders.

A company's balance sheet will "balance" even if it is on the verge of bankruptcy.

What do forensic accountants do?

Rosalyn owns stock in Munnymacher Inc. and just received her annual report from this company. If she wants to see the total value of Munnymacher's assets, she should look at the company's balance sheet.

Many firms offer a comparative statement to show previous accounting periods side by side, making it possible to see how account values have changed over a period of time.

As represented on the balance sheet, a firm has which of the following two sources of funds?

List four specific financial ratios used by financial managers and explain what each measures.

Why are out-of-pocket costs easy to measure?

Radcliffe McCoy is the financial manager for his company. He is comparing income statements from the past three years to see the trend (if any) in cost of goods sold and other expenses. Which of the following is he using?

Financial accounting uses procedures developed internally that are not required to follow accounting standards.

The MediaX company has current assets of $565,000 and current liabilities of $342,000 (565,000/343,000 = 1.65). What does this current ratio mean?

Which of the following statements is the rationale for the accounting equation?

A high debt-to-equity ratio indicates that the firm is relying heavily on debt, or is "highly leveraged."