Exam 4: Financial Reporting and Analysis

Profitability means having enough cash on hand to pay bills when they become due.

Accounting information should make a difference to the outcome of a decision,according to the qualitative characteristic of

The asset turnover ratio measures

Which of the following is a measure of liquidity?

The following lettered items represent a classification scheme for a balance sheet,and the numbered items represent accounts.In the blank next to each account,write the letter indicating to which category it belongs. a. Current assets b. Investments c. Property, plant, and equipment d. Intangible assets e. Current liabilities f. Long-term liabilities g. Stockholders' equity h. Not on balance sheet

General-purpose external financial statements that are divided into subcategories are called classified financial statements.

On the income statement of a merchandising company,net income is the amount by which net sales exceed operating expenses.

The convention of consistency pertains to the use of the same accounting principles by firms in the same industry.

The investments category on the balance sheet normally includes investments that are intended to be held for a short period of time.

Which type of account is cost of goods sold?

The main difference among the balance sheets of the sole proprietorship,the partnership,and the corporation is found in the owners' equity section.

Use this information to answer the following question. Alcorn \& Zeto Company Income Statement For the Year Ended December 31, 2010 Revenues Net sales \ 100,000 Dividend income 8,750 Total revenues \ 108,750 Costs and expenses Costs of goods sold \ 29,000 Selling expenses 10,000 General and administrative expenses 13,750 Interest expense 6,250 Total costs and expenses 59,0000 Income before income taxes \ 49,750 Income taxes 19,500 income \ 30,250 If the income statement were prepared in a multistep form,gross margin from sales would be

Which of the following should not be classified as a current asset?

The following lettered items represent a classification scheme for a multistep income statement.In the blank next to each account,write the letter indicating to which category it belongs. a. Revenues b. Cost of goods sold c. Selling expenses d. General and administrative expenses e. Other revenues and expenses f. Not on income statement _____ 1. Depreciation Expense (for delivery truck) _____ 2. Dividend Income _____ 3. Cash _____ 4. Interest Income _____ 5. Prepaid Rent _____ 6. Rent Expense (for main office) _____ 7. Advertising Expense _____ 8. Personnel Expense _____ 9. Unearned Revenue _____ 10. Sales Discounts

Use this information to answer the following question. The total dollar amount of assets to be classified as investments is

To understand accounting information,users must be familiar with the accounting conventions,or rules of thumb,used in preparing financial statements.

An advantage of the single-step income statement over the multistep form is

A company with a profit margin of 6 percent earns six cents profit for every dollar of net sales.

Asset turnover measures how efficiently assets are used to produce sales.

An advantage of accounting information is that it provides exact and completely reliable measures.