Question 1

What purpose does the balance sheet serve?

Accepted Answer

A)  It shows the stock price of the firm during the last year and how much fluctuation there have been in the stock price. 
B)  It shows short- and long-term liquidity ratios, profitability ratios, and activity ratios. 
C)  It shows a firm's financial condition on a particular date in terms of its assets, liabilities, and owners' equity. 
D)  It shows investors how much profit the firm made during the last year. 
E)  It shows a firm's sources and uses of cash. 
A)  It shows the stock price of the firm during the last year and how much fluctuation there have been in the stock price. 
B)  It shows short- and long-term liquidity ratios, profitability ratios, and activity ratios. 
C)  It shows a firm's financial condition on a particular date in terms of its assets, liabilities, and owners' equity. 
D)  It shows investors how much profit the firm made during the last year. 
E)  It shows a firm's sources and uses of cash.

Question 2

Under which condition is owners' equity positive?

Accepted Answer

A)  Assets are greater than liabilities. 
B)  Assets and liabilities are equal. 
C)  Credits exceed debits. 
D)  Liabilities are greater than assets. 
E)  Debits exceed credits. 
A)  Assets are greater than liabilities. 
B)  Assets and liabilities are equal. 
C)  Credits exceed debits. 
D)  Liabilities are greater than assets. 
E)  Debits exceed credits.

Question 3

What is the purpose of computing the earnings per share ratio?

Accepted Answer

A)  To determine which firm gets the most out of its resources 
B)  To determine the net profit margin 
C)  To measure a firm's ability to meet its current liabilities 
D)  To attract investors 
E)  To measure the net income earned by a business for each dollar invested 
A)  To determine which firm gets the most out of its resources 
B)  To determine the net profit margin 
C)  To measure a firm's ability to meet its current liabilities 
D)  To attract investors 
E)  To measure the net income earned by a business for each dollar invested

Question 4

The amount of profit or loss will be reflected in the

Accepted Answer

A)  balance sheet. 
B)  cost of goods sold. 
C)  quick ratio. 
D)  income statement. 
E)  statement of cash flow. 
A)  balance sheet. 
B)  cost of goods sold. 
C)  quick ratio. 
D)  income statement. 
E)  statement of cash flow.

Question 5

Owners' equity consists of two sources: the amount that the owners originally invested, and profits earned by and reinvested in the company.

Accepted Answer

A) True 
 B)False

Question 6

The matching principle takes precedence over the income statement.

Accepted Answer

A) True 
 B)False

Question 7

A company's owners invested $10 000 total into the company, which made a profit of $3500 last year. Its total liabilities are currently at $7000. What is the value of the total assets of this company?

Accepted Answer

A)  $3000 
B)  $3500 
C)  $6500 
D)  $13 500 
E)  $27 500 
A)  $3000 
B)  $3500 
C)  $6500 
D)  $13 500 
E)  $27 500

Question 8

At the end of the fiscal year for Santos Industrial Machinery, management raised concerns about the company's financial performance. The company's accountants have been asked to analyze the current financial state of the company by using ratio analysis. Santos's executives are most interested in seeing the company's short-term solvency ratios. Based on this information, what question do they most likely want to have answered?

Accepted Answer

A)  Can the company pay its immediate debts without obtaining further loans? 
B)  Does the company have enough inventory to meet sales demands? 
C)  How much inventory on hand does Santos have? 
D)  How much bonds payable debt is Santos carrying? 
E)  Is the company selling products at an appropriate price? 
A)  Can the company pay its immediate debts without obtaining further loans? 
B)  Does the company have enough inventory to meet sales demands? 
C)  How much inventory on hand does Santos have? 
D)  How much bonds payable debt is Santos carrying? 
E)  Is the company selling products at an appropriate price?

Question 9

Which of the following calculates the debt-to-owners' equity ratio?

Accepted Answer

A)  Long-term liabilities divided by owners' equity 
B)  Current liabilities divided by owners' equity 
C)  Long-term liabilities divided by retained earnings 
D)  Total liabilities divided by retained earnings 
E)  Total liabilities divided by owners' equity 
A)  Long-term liabilities divided by owners' equity 
B)  Current liabilities divided by owners' equity 
C)  Long-term liabilities divided by retained earnings 
D)  Total liabilities divided by retained earnings 
E)  Total liabilities divided by owners' equity

Question 10

Which of the following will calculate the current ratio?

Accepted Answer

A)  Current liabilities divided by current assets 
B)  Current assets divided by current liabilities 
C)  Current assets minus current liabilities 
D)  Current assets divided by total liabilities 
E)  Current liabilities minus current assets 
A)  Current liabilities divided by current assets 
B)  Current assets divided by current liabilities 
C)  Current assets minus current liabilities 
D)  Current assets divided by total liabilities 
E)  Current liabilities minus current assets

Question 11

Employees and unions use accounting information

Accepted Answer

A)  to plan for tax inflows. 
B)  to set goals, develop plans, set budgets, and evaluate future prospects. 
C)  to estimate returns. 
D)  to decide if the company is a good credit risk. 
E)  to plan for benefits. 
A)  to plan for tax inflows. 
B)  to set goals, develop plans, set budgets, and evaluate future prospects. 
C)  to estimate returns. 
D)  to decide if the company is a good credit risk. 
E)  to plan for benefits.

Question 12

Rose is reviewing a company's accounting system, checking the ledgers and journals, and tracking some transactions to see how they were handled. Rose is engaged in

Accepted Answer

A)  financial accounting. 
B)  managerial accounting. 
C)  auditing. 
D)  public accounting. 
E)  bookkeeping. 
A)  financial accounting. 
B)  managerial accounting. 
C)  auditing. 
D)  public accounting. 
E)  bookkeeping.

Question 13

Prahbat is looking at a financial statement produced by Iron Corp. The statement lists the company's annual revenues, its expenses, and its profit. Prahbat is looking at a(n)

Accepted Answer

A)  cash flow statement. 
B)  revenue-expense statement. 
C)  balance sheet. 
D)  budget. 
E)  income statement. 
A)  cash flow statement. 
B)  revenue-expense statement. 
C)  balance sheet. 
D)  budget. 
E)  income statement.

Question 14

Which of the following is an intangible asset?

Accepted Answer

A)  An inventory level of 1000 copies of a book 
B)  The copyright for a textbook 
C)  A printing press used in the publication of a book 
D)  A $1000 Canada Savings Bond 
E)  The building in which a book was printed 
A)  An inventory level of 1000 copies of a book 
B)  The copyright for a textbook 
C)  A printing press used in the publication of a book 
D)  A $1000 Canada Savings Bond 
E)  The building in which a book was printed

Question 15

________ is an asset that represents the cost of merchandise which was made or bought for sale to customers and that is still on hand.

Accepted Answer

A)  Accounts payable 
B)  Prepaid expenses 
C)  Cost of goods sold 
D)  Merchandise inventory 
E)  Accounts receivable 
A)  Accounts payable 
B)  Prepaid expenses 
C)  Cost of goods sold 
D)  Merchandise inventory 
E)  Accounts receivable

Question 16

What do activity ratios show?

Accepted Answer

Activity ratios meas

Question 17

Explain how the accounting equation and double-entry accounting are used in record keeping.

Accepted Answer

Accountants use the accounting equation

Question 18

Historically, it was thought that the current ratio should be ________, but more recently, many firms that are financially strong operate with current ratios of ________.

Accepted Answer

A)  at least 10:1; less than 5:0 
B)  more than 7:1; 2.0 
C)  less than 5:1; more than 10:1 
D)  2:1; less than 2:1 
E)  3:1; less than 5:1 
A)  at least 10:1; less than 5:0 
B)  more than 7:1; 2.0 
C)  less than 5:1; more than 10:1 
D)  2:1; less than 2:1 
E)  3:1; less than 5:1

Question 19

Which of the following is designed primarily for internal use by a company's managers (e.g., the production manager)?

Accepted Answer

A)  Income statements 
B)  Statement of retained earnings 
C)  Budget 
D)  Balance sheets 
E)  Statements of cash flow 
A)  Income statements 
B)  Statement of retained earnings 
C)  Budget 
D)  Balance sheets 
E)  Statements of cash flow

Question 20

Leverage measures the ability of the firm to pay bills as they come due.

Accepted Answer

A) True 
 B)False

What purpose does the balance sheet serve?

Under which condition is owners' equity positive?

What is the purpose of computing the earnings per share ratio?

The amount of profit or loss will be reflected in the

Owners' equity consists of two sources: the amount that the owners originally invested, and profits earned by and reinvested in the company.

The matching principle takes precedence over the income statement.

A company's owners invested $10 000 total into the company, which made a profit of $3500 last year. Its total liabilities are currently at $7000. What is the value of the total assets of this company?

Which of the following calculates the debt-to-owners' equity ratio?

Which of the following will calculate the current ratio?

Employees and unions use accounting information

Rose is reviewing a company's accounting system, checking the ledgers and journals, and tracking some transactions to see how they were handled. Rose is engaged in

Prahbat is looking at a financial statement produced by Iron Corp. The statement lists the company's annual revenues, its expenses, and its profit. Prahbat is looking at a(n)

Which of the following is an intangible asset?

________ is an asset that represents the cost of merchandise which was made or bought for sale to customers and that is still on hand.

What do activity ratios show?

Explain how the accounting equation and double-entry accounting are used in record keeping.

Historically, it was thought that the current ratio should be , but more recently, many firms that are financially strong operate with current ratios of .

Which of the following is designed primarily for internal use by a company's managers (e.g., the production manager)?

Leverage measures the ability of the firm to pay bills as they come due.

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Finacial Decisions and Risk Management

Filters

Exam 11: Understanding Accounting

What purpose does the balance sheet serve?

Under which condition is owners' equity positive?

What is the purpose of computing the earnings per share ratio?

The amount of profit or loss will be reflected in the

Owners' equity consists of two sources: the amount that the owners originally invested, and profits earned by and reinvested in the company.

The matching principle takes precedence over the income statement.

A company's owners invested $10 000 total into the company, which made a profit of $3500 last year. Its total liabilities are currently at $7000. What is the value of the total assets of this company?

Which of the following calculates the debt-to-owners' equity ratio?

Which of the following will calculate the current ratio?

Employees and unions use accounting information

Rose is reviewing a company's accounting system, checking the ledgers and journals, and tracking some transactions to see how they were handled. Rose is engaged in

Prahbat is looking at a financial statement produced by Iron Corp. The statement lists the company's annual revenues, its expenses, and its profit. Prahbat is looking at a(n)

Which of the following is an intangible asset?

________ is an asset that represents the cost of merchandise which was made or bought for sale to customers and that is still on hand.

What do activity ratios show?

Explain how the accounting equation and double-entry accounting are used in record keeping.

Historically, it was thought that the current ratio should be ________, but more recently, many firms that are financially strong operate with current ratios of ________.

Which of the following is designed primarily for internal use by a company's managers (e.g., the production manager)?

Leverage measures the ability of the firm to pay bills as they come due.

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Finacial Decisions and Risk Management

Filters

Historically, it was thought that the current ratio should be , but more recently, many firms that are financially strong operate with current ratios of .