Exam 17: Understanding Accounting and Financial Information

For firms that sometimes have difficulty selling their inventory,the current ratio is likely to be a better measure of liquidity than the acid-test ratio.

Accountants record,classify,and ____________ the results of the financial information they gather.

Ralph owns a small business.Some friends have suggested that he should switch from his current manual accounting system to one that is computerized.Ralph is not certain he wants to use computers in his small firm's accounting system.He is concerned about the time it would take to learn the system,and wonders whether the benefits will justify the costs of setting up the system.As a small business owner,Ralph would probably find that:

Carol has worked as a bookkeeper for a small clothing store for almost three years.Her old boss recently retired and a new manager took over.The new manager frequently asks her for information and advice about how to interpret the information she records.Carol's experience as a bookkeeper means she is qualified to provide this type of advice.

Financial accountants prepare reports for owners,creditors,suppliers,and others outside of the organization.

Generally the higher the risk involved in an activity,the ________ the rate of return expected by investors.

When it comes to the treatment of depreciation and valuation of inventory,generally accepted accounting principles ____________________.

The Barkley Company balance sheet shows the following items: Accounts payable totaling $50,000;salaries payable totaling $65,000,and notes payable totaling $100,000.These are liabilities,or money that the firm owes others.

The value of resources the firm owns,minus the amount of money the firm owes to others = ___________.

Johnson Products is a small manufacturing firm specializing in custom-order tool and die work.A computerized accounting system would help Johnson Products by:

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

Becky Hunter is an accountant employed by FAF Enterprises.Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets.Becky is a:

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

Resources that a firm owns are called:

Both the current ratio and the acid-test ratio are liquidity ratios.

What is the difference between a journal and a ledger? How are journals and ledgers incorporated into the accounting cycle?

The main reason an accountant would conduct a trial balance is to:

Nebraska Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

The U.S.government is a user of a firm's accounting information.

Peak Performance Sporting Goods Company has collected the following information about itself and its competitors: Which of the following statements explains the importance of this information?