Exam 4: Foundations of Financial Reporting and the Classified Balance Sheet

Use the following information to calculate the liquidity and profitability ratios listed below.Round to two decimal places. a.Current ratio b.Working capital c.Return on equity d.Profit margin e.Debt to equity ratio f.Return on assets g.Asset turnover

Use this balance sheet and income statement for the first year of operations for Cane Construction to answer the following question.Use ending balances whenever average balances are required for computing ratios. -The return on assets for Cane Construction is

Which of the following statements best describes predictive value?

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. -The total amount of working capital for National Textile is

Only the chief financial officer and the company's CPAs must certify that,to their knowledge,the statements are accurate and complete.

Profitability means having enough cash on hand to pay bills when they become due.

The relevance of accounting information means that the information has a direct bearing on a decision.

Current assets divided by current liabilities is known as the

Use this information to answer the following question. The total amount of working capital is

Which accounting convention requires a note to the financial statements explaining the company's method of revenue recognition?

The Securities and Exchange Commission instituted rules requiring the chief executive officers and chief financial officers of all publicly traded companies to certify that,to their knowledge,the quarterly and annual statements that their companies file with the SEC are

Accounting information should make a difference to the outcome of a decision,according to the qualitative characteristic of

A company with a low debt to equity ratio is in a more vulnerable position during poor economic times than a company with a high debt to equity ratio.

Pierce Ice Cream Company operates several ice cream shops across the United States.The company has plans to expand the number of shops during the coming year.This planned expansion will require a large bank loan.During the past 5 years,some periods were more profitable than others,and the President of Pierce has suggested to the company accountant that the depreciation and inventory valuation methods should be changed frequently.This change would allow the company to create the appearance that earnings were very consistent over the years.Discuss the merits of the President's suggestion regarding the financial statements.

Return on assets is a measure of liquidity.

The convention of consistency has led to an increase in the notes to financial statements.

Full disclosure of all important facts aids in overcoming the limitations of accounting information.

The normal operating cycle helps define which of the following balance sheet sections?

A debt to equity ratio of 1.0 means that half of the company's assets are financed by creditors.

Why is it important for a company to maintain the same accounting methods and practices from period to period?