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Exam 17: Understanding Accounting and Financial Information

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Question 141

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Rent,salaries,insurance and depreciation are examples of the cost of goods sold.

A) True
B) False

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Question 142

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Your firm is a supplier to a major chain of discount stores.You have heard rumors that this chain of discount stores is in financial difficulty.Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

A) Liquidity ratios
B) Leverage ratios
C) Activity ratios
D) Profitability ratios

E) A) and B)
F) A) and C)

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Question 143

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The Barkley Company wants to know the value of its owners' equity.It will total its assets and subtract its liabilities.

Bark Three Times Pet Store's owner is concerned with how his business decisions affect the "bottom line".This is another way of saying that he is concerned with the impact of his decisions on net income after taxes.

The financial ratios that measure a firm's ability to pay its short-term debts are called:

The key financial statements are the balance sheet,the income statement,and the statement of cash flows.

Accountant Alan Wingspan has just finished working on the balance sheet,income statement,and statement of cash flows for his company.The next step in the accounting cycle involves:

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

Explain the differences between managerial and financial accounting,and give examples of the types of problems and issues examined by each of these areas of accounting.

If prices of inventory are unchanged throughout the year,LIFO and FIFO inventory valuation methods will produce the same reported net income.

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.

Financial accounting involves activities such as preparing budgets and measuring production costs.

Important provisions of the Sarbanes-Oxley Act:

As an accountant,Joe Billing's responsibilities include:

The inventory turnover ratio for all firms should be greater than 2 times.

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.

Sales receipts,purchase orders,and payroll records are all examples of accounting transactions that would be recorded by a(n) :

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.

Hap owns and operates a small business with only four full-time employees and less than $500,000 in annual sales.He currently uses a manual accounting system and relies on a part-time bookkeeper to keep his records in order.In evaluating the possible adoption of a computerized accounting system,Hap will probably discover that:

As the burden of taxes grows,the role of the auditor becomes increasingly important to the organization.