Exam 12: The Role of Accounting in Business

Its _____ ratio will measure overall company performance and tell you how successful management is at running the business.

A long-term asset that will be used for several years-say, a vehicle-appears on the income statement as a depreciation expense.

As a junior accountant for the Waterford Crystal Co. of New Bedford, Connecticut, you’ve just completed an intensive four-week initial training session. During your first week at Waterford, you’ll be applying many of the concepts that you worked so hard to understand over the course of four grueling years of college accounting classes: sales revenues, cost of goods sold, operating and administrative costs, taxes, interest expenses, and net profit. In week two, you’ll get some actual experience working with current and long-term assets, current and long-term liabilities, and owner’s equity. In your third week, you’ll be keeping track of all cash coming into and going out of the business. -During week two, you'll get some experience working with _____.

Fixed cost/contribution margin per unit equals a company's breakeven point in units.

What two items does an income statement show?

Breakeven analysis is a method of determining the level of sales at which a company will have no profit or loss.

If a company arranges to pay later rather than in cash for materials and other expenses, its accountant must set up accounts _____.

You can regard the "bottom line" and "net income" as the same thing.

Bakersfield, Smith, and Babble LLC is a midsized accounting firm in New England. In order to project an image as a full service company, each partner specializes in a different field of accounting. Bakersfield provides information and analysis to business owners in order to help them operate their companies. Smith’s job is to furnish information to individuals and groups both inside and outside organizations to help them assess their firms’ financial performances. Babble is primarily responsible for preparing financial statements for business owners, managers, and investors and other users, such as creditors and government agencies. -Smith specializes in management accounting.

In the summer of 2001, executives at Enron manipulated accounting reports to make the energy company look better off financially than it really was.

To determine a company's interest coverage, you divide its operating income by its _____.

Dividing your inventory by your cost of goods sold will yield your inventory turnover rate.

In order to find the difference between a company's cash inflow from operating activities and its cash inflow from investing activities, you would examine its balance sheet.

Accounting is often called "the language of business."

Public accounting firms offer consulting and tax services, the hallmark of the profession being the performance of internal audits.

Certified public accountants provide clients with accounting and tax services.

If she wants to know how competently her company's assets are being managed, junior accountant Amy Duerkin will analyze its _____ ratio.

This past year Donald's Duck Farm had revenues of $25,000. The company spent $1,000 per month on duck eggs and $700 per month on feed, rent, and utilities to keep incubators running. What was Donald's net income

Its debt-to-equity ratio shows the risk entailed by a company's capital structure.

The cost of using a long-term asset (such as a vehicle), that will be used in a business for several years is spread over the asset's useful life. Its annual allocated cost appears on the income statement as a(n) _____ expense.