Deck 1: Overview of Corporate Financial Reporting

Question 1

A gain or increase in the value of shares is known as capital appreciation.

Answer 1

True

Question 2

Creditors are entities that lend money to a company rather than buying shares of a company.

Answer 2

True

Question 3

Assets are listed in the order of their liquidity on the classified Statement of Financial Position.

Answer 3

True

Question 4

There may be a single shareholder in the case of a public company or many shareholders in the case of a private company.

Question 5

Profit is determined by subtracting the income earned during the period from the expenses incurred during the same period.

Question 6

If an investor owns 10% of the shares of a company,they normally own 10 shares of the company.

Question 7

The shareholders are an example of an internal user of annual report information.

Question 8

Net earnings is the amount of the company's revenue that remains after all of its expenses are accounted for.

Question 9

The statement of financial position measures cash inflows and outflows of a company over a period of time.

Question 10

Decision makers are often referred to as users of the financial statements and include investors and creditors.

Question 11

Dividends are payments made by the company to distribute future profits.

Question 12

The financial statements of a company are prepared by the shareholders.

Question 13

Gross profit is equal to the sales received from goods and the operating expenses incurred during the period.

Question 14

The section of an annual report that contains management's discussion of the company's operating results is referred to as the Statement of Management's Responsibility.

Question 15

Expenses are defined as increases in economic benefits.

Question 16

The primary purpose of financial accounting information is to aid users in their economic decision making relative to the organization.

Question 17

A firm's activities can be divided into borrowing,investing,and operating.

Question 18

Income can also include gains that a company generates from sales that are outside their normal course of operations.

Question 19

Information contained in the financial statements of a company is of use to both internal and external users.

Question 20

Prepaid expenses can be found on the Statement of Income.

Question 21

Canadian companies use a 12-month period to distinguish between items that are current from those that are non-current.

Question 22

Share capital records the amount that investors have received in the form of dividends.

Question 23

Privately held corporations

A)always have multiple shareholders.
B)always require a board of directors to represents its interests.
C)raise capital through the sale of shares.
D)none of the above

Question 24

Companies that are growing normally have negative cash flows from investing activities.

Question 25

Liquidity refers to how long something will be received,realized,or consumed.

Question 26

Those who lend money or otherwise extend credit rather than invest it directly are known as

A)investors.
B)regulators.
C)creditors.
D)unions.

Question 27

Deferred revenue represents customer deposits.

Question 28

The shareholders typically elect which of the following to represent their interests?

A)senior management
B)independent auditors
C)board of directors
D)chief operating officer

Question 29

The MD&A provides a discussion of the risks facing the company and information about future plans.

Question 30

The annual report includes everything,except for

A)managerial statements.
B)management discussion and analysis.
C)financial statements.
D)notes to the financial statements.
E)all of the above

Question 31

Retained earnings is the earnings that have been kept and not paid out as dividends.

Question 32

Working capital measures the company's ability to meet its short-term obligations using its non-current assets.

Question 33

In which section of the annual report does management comment on the company and its operating results?

A)report to the shareholders
B)management's discussion and analysis
C)corporate profile
D)selected financial data

Question 34

Publicly traded corporations that fail to comply with securities regulations related to statement presentation and timing,may

A)be fraudulent.
B)be delisted.
C)face criminal charges.
D)have a questionable management team.

Question 35

IFRS are the financial reporting standards that must be followed by Canadian public companies.

Question 36

Which of the following is an internal user of annual report information?

A)creditors
B)board of directors
C)regulators
D)shareholders

Question 37

Shareholders' equity is often referred to as the net assets of the company.

Question 38

All of the following are external users except

A)labour unions.
B)management.
C)regulators.
D)journalists.

Question 39

Creditors include which of the following?

A)suppliers
B)financial institutions
C)employees
D)all of the above

Question 40

Financial Accounting is also referred to as

A)internal reporting.
B)management reporting.
C)external financial reporting.
D)all of the above

Question 41

A corporation whose shares are held by a small number of individuals is referred to as a

A)proprietorship.
B)publicly traded corporation.
C)small business corporation.
D)privately held corporation.

Question 42

Which of the following statements best describes a corporation?

A)can be single or multiple owners
B)taxed separately
C)most expensive to establish
D)all of the above

Question 43

An example of an investing activity is

A)purchase of inventory.
B)collections of amounts owed by customers.
C)purchase of shares of other companies.
D)payment of taxes.

Question 44

Which of the following is a typical financing activity?

A)payment of dividends
B)payment of interest expense
C)payment of wages
D)purchases of inventory

Question 45

What is the initial investment by the shareholders in a company called?

A)owners' capital
B)shareholders' capital
C)retained earnings
D)shareholders' equity

Question 46

The form of business ownership that most effectively limits the risk of ownership is

A)sole proprietorship.
B)general partnership.
C)corporation.
D)none of the above,all forms of business ownership are equally risky.

Question 47

Which of the following is an example of an operating activity?

A)paying dividends
B)sale of investment in other companies' shares
C)purchase of property,plant,and equipment
D)payment of interest expense

Question 48

Jennifer is a university student looking to earn some cash for tuition over the summer months (April-August).She has decided to start a lawn care business,what business structure would best suit her needs?

A)private corporation
B)public corporation
C)general partnership
D)sole proprietorship

Question 49

Which of the following statements best describes a partnership?

A)separate legal entity
B)single owner
C)most expensive to establish
D)owners are responsible for debt of the company

Question 50

An example of a financing activity is

A)purchase of property.
B)issuing shares.
C)sales to customers.
D)payment of taxes.

Question 51

All of the following are investing activities except

A)earning interest income.
B)purchasing property,plant,and equipment.
C)purchasing other companies' shares.
D)selling property,plant,and equipment.

Question 52

The fundamental types of business activities that a firm typically engages in include all of the following except

A)operating.
B)borrowing.
C)investing.
D)financing.

Question 53

Operating activities include all of the following except

A)collections of accounts receivable.
B)payment of tax expense.
C)payment of dividends.
D)payment of interest expense.

Question 54

A friend is looking to purchase shares as an investment,but would like information about whether or not the company has paid dividends in the last year.Where would your friend find this information in the financial statements?

A)Income Statement
B)Operating Activities on the Cash Flow Statement
C)Investing Activities on the Cash Flow Statement
D)Financing Activities on the Cash Flow Statement

Question 55

Which of the following statements best describes a proprietorship?

A)can be single or multiple owners
B)taxed separately
C)most expensive to establish
D)owner is responsible for debt of the company

Question 56

Businesses can be operated in a number of different forms,such as a

A)corporation.
B)partnership.
C)proprietorship.
D)all of the above.

Question 57

Which statement is incorrect in regards to the characteristics of a corporation?

A)It is a separate legal entity.
B)It can be sued.
C)Shareholders liability is limited to their investment.
D)It cannot be publicly accountable.

Question 58

An example of an operating activity is

A)repaying loan principal.
B)paying dividends.
C)purchase of shares of other companies.
D)payments of taxes owed to the government.

Question 59

Which of the following is a typical financing activity?

A)purchasing property,plant or equipment
B)purchasing another company's shares
C)paying interest expense
D)paying dividends

Question 60

Which of the following is not a typical operating activity?

A)payment of accounts payable
B)payment of long-term notes payable
C)payment of wages
D)collection of accounts receivable

Question 61

Which of the following statements best describes financial accounting?

A)An information system in which the underlying transactions of organization are captured,analyzed,and reported.
B)The reports that management prepares for the owners of the company summarizing how the company performed during the period.
C)An information system in which all transactions with the company are accurately reported.
D)The reports that management prepares for use in making decisions related to the financing,investing,and operating activities of a company.

Question 62

Where would the information about company operations be found?

A)on the Statement of Income
B)on the Statement of Financial Position
C)in the notes of the financial statements
D)in the statement of management responsibility

Question 63

In 2020 Muller Ltd.earned gross revenues of $2,500,000 and had net income of $480,000.During 2020 the company had 200,000 common shares outstanding and its average shareholders' equity was $1,000,000.Muller's basic earnings per share for 2020 is

A)$2.50.
B)$2.40.
C)$12.50.
D)$0.48.

Question 64

A positive ___ represents an internal source of funding.

A)Cash flow
B)Retained earnings
C)Dividends account
D)Share capital account

Question 65

All of the following can be found on an Statement of Income except

A)Interest expense.
B)Depreciation expense.
C)Prepaid rent expense.
D)Other income.

Question 66

Capital Appreciation refers to

A)sale of shares at a price higher than the purchase price
B)the gain on the sale of an asset
C)the allocation of the value of an asset over its useful life
D)all of the above