Question 1

Franchisors capitalizing or financing their businesses are generally required to disclose three key financial statements.Which of the following is not one of those statements?

Accepted Answer

A)  income statement or operating statement
B)  balance sheet or statement of financial position
C)  net profit statement or bottom line
D)  cash flow or cash budget statement C

Question 2

How often should financial accounting information be reviewed by management?

Accepted Answer

A)  monthly
B)  every fiscal quarter
C)  every six months
D)  annually B

Question 3

Which of the following types of financial ratios measures the ability of the franchise organization to turn sales into profits?

Accepted Answer

A)  activity
B)  market
C)  profitability
D)  coverage/leverage C

Question 4

Which of the following processes involves interpreting a relationship between two financial figures?

Accepted Answer

A)  accounting
B)  ratio analysis
C)  ledgering
D)  cash flow

Question 5

What is the purpose of ratio analyses of financial statements?

Accepted Answer

A)  to gauge the franchise's profit potential
B)  to asses the franchisor or franchisee's management skills
C)  to determine the success of the franchise in meeting its overall objectives
D)  to measure the exact worth of a franchise

Question 6

Which of the following types of financial ratios measures how well a franchise meets its short-term debts or financial obligations?

Accepted Answer

A)  liquidity
B)  profitability
C)  activity
D)  coverage/leverage

Question 7

Which of the following is like a "snapshot" of the franchise's fiscal condition?

Accepted Answer

A)  the cash flow statement
B)  the balance sheet
C)  the income statement
D)  the bottom line

Question 8

What do financial ratios analyze?

Accepted Answer

A)  the "bottom line"
B)  the return to the franchised business owner
C)  the "net" profit
D)  all of the above

Question 9

A franchise's economic figures must be recorded,then transferred and balanced before final calculations can be determined.Which of the following sequences indicates the path taken by these figures during the accounting process?

Accepted Answer

A)  journal,general ledger,financial statements
B)  general ledger,journal,financial statements
C)  financial statements,journal,general ledger
D)  journal,financial statements,general ledger

Question 10

Which of the following things is NOT true about the accounting process?

Accepted Answer

A)  it sometimes develops an imprecise picture of the franchise.
B)  it can measure the exact worth of a franchise.
C)  it consists of the measurement and record of money,assets,and resources and their flow through the franchise.
D)  its records are not exact.

Exam 10: Accounting and Financial Statements: Presentation and Uses