Exam 12: The Role of Accounting in Business

A company can assess its financial strengths by analyzing its _____ ratios.

A company's balance sheet reports its owner's equity.

Interest coverage equals interest expense divided by operating income.

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. -In preparing the company's income statement, you'll report on all of the following items except _____.

When you sell goods, you generate a _____ profit.

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. -Babble spends his time in financial accounting.

The relationship between funds acquired from creditors and funds invested by owners is called principal structure.

_____, which supply relevant, accurate, timely information in a format that will aid them in making decisions, are tailored to the needs of individual managers.

The _____ ratio may suggest that inventory is moving quickly even though the rate of turnover is slowing.

Vertical percentage analysis expresses each item on an income statement as a percentage of a certain base.

If you sell merchandise rather than services, your financial statements won't have a cost-of-goods sold line.

To find out if you have made a profit, you will prepare a socalled "general statement," which shows revenues and expenses.

Management accounting furnishes information to individuals and groups both inside and outside the organization.

Working in the field of _____ accounting, John Bates furnishes information to individuals and groups both inside and outside his organization to help them assess the firm's financial performance.

Your statement of cash flows shows how much cash you have coming in and going out.

Your _____ shows organizational sales, expenses, and profit.

Accounting is a "people profession," not just a number-crunching business.

The _____ Act severely restricts the ability of accountants to serve the same clients as both auditors and consultants.

Although public accounting firms offer consulting and tax services, the hallmark of the profession is the performance of _____ audits.

The Kathryn Lorillard Co.'s income after taxes is called _____ income.