Question 1

An asset is

Accepted Answer

A)  the amount of money originally invested in a business by its owners. 
B)  the amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities. 
C)  the profits earned by and reinvested in the company. 
D)  any economic resource expected to benefit a firm or an individual who owns it. 
E)  a debt owed by a firm to an outside organization or individual. 
A)  the amount of money originally invested in a business by its owners. 
B)  the amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities. 
C)  the profits earned by and reinvested in the company. 
D)  any economic resource expected to benefit a firm or an individual who owns it. 
E)  a debt owed by a firm to an outside organization or individual.

Question 2

Andy's line of credit with a local bank is likely a(n)

Accepted Answer

A)  intangible asset. 
B)  prepaid expense. 
C)  current liability. 
D)  account receivable. 
E)  long-term liability. 
A)  intangible asset. 
B)  prepaid expense. 
C)  current liability. 
D)  account receivable. 
E)  long-term liability.

Question 3

There are really only two users of accounting information: the business managers whose activities have generated the information,and the government taxation officials who tax the business.

Accepted Answer

A) True 
 B)False

Question 4

The current ratio is an example of ________,while earnings per share is an example of __________:

Accepted Answer

A)  a long-term solvency ratio; a leverage ratio 
B)  a short-term solvency ratio; an activity ratio 
C)  a short-term solvency ratio; a profitability ratio 
D)  a leverage ratio; a profitability ratio 
E)  an activity ratio; a profitability ratio 
A)  a long-term solvency ratio; a leverage ratio 
B)  a short-term solvency ratio; an activity ratio 
C)  a short-term solvency ratio; a profitability ratio 
D)  a leverage ratio; a profitability ratio 
E)  an activity ratio; a profitability ratio

Question 5

At Lexi Corp.,sales revenue is $20 million,the cost of goods sold is $14 million,operating expenses are $3 million,and income taxes are $1 million.What is the company's operating income?

Accepted Answer

A)  $6 million 
B)  $17 million 
C)  $3 million 
D)  $2 million 
E)  None of these 
A)  $6 million 
B)  $17 million 
C)  $3 million 
D)  $2 million 
E)  None of these

Question 6

What is the formula for inventory turnover?

Accepted Answer

(cost of g

Question 7

Liabilities reflected on the balance sheet are divided into two general categories: current (debts to be paid within one year)and long term (due more than a year into the future).

Accepted Answer

A) True 
 B)False

Question 8

What does the debt-to-owners'-equity ratio tell us?

Accepted Answer

A)  The extent to which the firm is financed through borrowed money 
B)  How much net income the business earns for each dollar invested 
C)  How readily the firm can meet unexpected demands for cash 
D)  The percentage of revenue that will be profit 
E)  The percentage of profits paid out to debt holders 
A)  The extent to which the firm is financed through borrowed money 
B)  How much net income the business earns for each dollar invested 
C)  How readily the firm can meet unexpected demands for cash 
D)  The percentage of revenue that will be profit 
E)  The percentage of profits paid out to debt holders

Question 9

Goodwill is the amount paid for an existing business beyond the value of its tangible assets.

Accepted Answer

A) True 
 B)False

Question 10

Under which condition is owners' equity positive?

Accepted Answer

A)  Assets are greater than liabilities. 
B)  Assets and liabilities are equal. 
C)  Net profit is greater than 10 percent of sales. 
D)  Liabilities are greater than assets. 
E)  Debits exceed credits. 
A)  Assets are greater than liabilities. 
B)  Assets and liabilities are equal. 
C)  Net profit is greater than 10 percent of sales. 
D)  Liabilities are greater than assets. 
E)  Debits exceed credits.

Question 11

A(n)________ is a debt owed by a firm to an outside organization or individual.

Accepted Answer

A)  liability 
B)  owners' equity 
C)  debit 
D)  asset 
E)  credit 
A)  liability 
B)  owners' equity 
C)  debit 
D)  asset 
E)  credit

Question 12

One manager (Adam)says that the income statement should be strong this year because the company has achieved a high level of sales revenue.Another manager (Eve)says that even with strong sales revenue,the income statement might not look particularly good.If the following facts were known,which one would strengthen Eve's argument?

Accepted Answer

A)  Gross sales were higher than last year. 
B)  In the current year,total operating expenses were high. 
C)  There is only one part-time accountant at the company. 
D)  There were relatively few sales returns this year. 
E)  Outsourcing helped the company reduce administrative salaries by 25 percent. 
A)  Gross sales were higher than last year. 
B)  In the current year,total operating expenses were high. 
C)  There is only one part-time accountant at the company. 
D)  There were relatively few sales returns this year. 
E)  Outsourcing helped the company reduce administrative salaries by 25 percent.

Question 13

A current asset is

Accepted Answer

A)  an expense,such as rent,that is paid before the upcoming period in which it is due. 
B)  a nonphysical asset,such as a patent or trademark,that has economic value in the form of an expected benefit. 
C)  an amount due from a customer who has purchased goods on credit. 
D)  an asset with long-term use or value,such as land,buildings,and equipment. 
E)  an asset that can or will be converted to cash within the following year. 
A)  an expense,such as rent,that is paid before the upcoming period in which it is due. 
B)  a nonphysical asset,such as a patent or trademark,that has economic value in the form of an expected benefit. 
C)  an amount due from a customer who has purchased goods on credit. 
D)  an asset with long-term use or value,such as land,buildings,and equipment. 
E)  an asset that can or will be converted to cash within the following year.

Question 14

One manager (Adam)says that the income statement should be strong this year because the company has achieved a high level of sales revenue.Another manager (Eve)says that even with strong sales revenue,the income statement might not look particularly good.What is Adam assuming?

Accepted Answer

A)  That high revenues equate to a healthy income statement 
B)  That various factors besides sales revenue must be taken into account to calculate the income statement 
C)  That sales revenue next year will likely be as good as this year's 
D)  That operating expenses have been relatively high this year 
E)  That gross profit is much lower than gross sales 
A)  That high revenues equate to a healthy income statement 
B)  That various factors besides sales revenue must be taken into account to calculate the income statement 
C)  That sales revenue next year will likely be as good as this year's 
D)  That operating expenses have been relatively high this year 
E)  That gross profit is much lower than gross sales

Question 15

A long-term liability is

Accepted Answer

A)  additional money,above proceeds from a sale of shares,paid directly to a firm by its owners. 
B)  a debt that must be paid within the year. 
C)  the amount paid for an existing business above the value of its other assets. 
D)  the process of distributing the cost of an asset over its useful life. 
E)  a debt that is not due for at least one year. 
A)  additional money,above proceeds from a sale of shares,paid directly to a firm by its owners. 
B)  a debt that must be paid within the year. 
C)  the amount paid for an existing business above the value of its other assets. 
D)  the process of distributing the cost of an asset over its useful life. 
E)  a debt that is not due for at least one year.

Question 16

Forensic accountants are sometimes used to

Accepted Answer

A)  ensure the accounting system adheres to GAAP. 
B)  track down hidden funds in business firms. 
C)  ensure auditors follow auditing standards. 
D)  ensure businesses remain profitable. 
E)  all of these. 
A)  ensure the accounting system adheres to GAAP. 
B)  track down hidden funds in business firms. 
C)  ensure auditors follow auditing standards. 
D)  ensure businesses remain profitable. 
E)  all of these.

Question 17

Madeline wants to determine operating income for her company.To do so,she must subtract both the cost of goods sold and all operating expenses from gross sales revenue.

Accepted Answer

A) True 
 B)False

Question 18

Financial statements fall into three broad categories,which are

Accepted Answer

A)  debits,credits,and loans. 
B)  income statements,balance sheets,and statements of cash flows. 
C)  assets,liabilities,and owners' equity. 
D)  cash,marketable securities,and goodwill. 
E)  budgets,income statements,and profit-and-loss statements. 
A)  debits,credits,and loans. 
B)  income statements,balance sheets,and statements of cash flows. 
C)  assets,liabilities,and owners' equity. 
D)  cash,marketable securities,and goodwill. 
E)  budgets,income statements,and profit-and-loss statements.

Question 19

If the following facts are known,which one would NOT strengthen the argument that a company must closely monitor its cash flow?

Accepted Answer

A)  The company needs to make sure it is not spending too much. 
B)  The company needs to generate a lot of revenue. 
C)  The company needs to make sure its employees are high performers. 
D)  The company needs to make sure it can pay its bills. 
E)  The company needs to make sure it can make capital expenditures in a timely fashion. 
A)  The company needs to make sure it is not spending too much. 
B)  The company needs to generate a lot of revenue. 
C)  The company needs to make sure its employees are high performers. 
D)  The company needs to make sure it can pay its bills. 
E)  The company needs to make sure it can make capital expenditures in a timely fashion.

Question 20

Intangible assets like patents,trademarks,and copyrights are included in owners' equity.

Accepted Answer

A) True 
 B)False

An asset is

Andy's line of credit with a local bank is likely a(n)

There are really only two users of accounting information: the business managers whose activities have generated the information,and the government taxation officials who tax the business.

The current ratio is an example of ,while earnings per share is an example of __:

At Lexi Corp.,sales revenue is $20 million,the cost of goods sold is $14 million,operating expenses are $3 million,and income taxes are $1 million.What is the company's operating income?

What is the formula for inventory turnover?

Liabilities reflected on the balance sheet are divided into two general categories: current (debts to be paid within one year)and long term (due more than a year into the future).

What does the debt-to-owners'-equity ratio tell us?

Goodwill is the amount paid for an existing business beyond the value of its tangible assets.

Under which condition is owners' equity positive?

A(n)________ is a debt owed by a firm to an outside organization or individual.

A current asset is

One manager (Adam)says that the income statement should be strong this year because the company has achieved a high level of sales revenue.Another manager (Eve)says that even with strong sales revenue,the income statement might not look particularly good.What is Adam assuming?

A long-term liability is

Forensic accountants are sometimes used to

Madeline wants to determine operating income for her company.To do so,she must subtract both the cost of goods sold and all operating expenses from gross sales revenue.

Financial statements fall into three broad categories,which are

If the following facts are known,which one would NOT strengthen the argument that a company must closely monitor its cash flow?

Intangible assets like patents,trademarks,and copyrights are included in owners' equity.

Understanding the Canadian Business System

Understanding the Environments of Business

Conducting Business Ethically and Responsibly

Understanding Entrepreneurship, small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Managing Human Resources

Understanding Labourmanagement Relations

Motivating and Leading Employees

Producing Goods and Services

Increasing Productivity and Quality

Managing Information Systems and Communication Technology

Understanding Marketing Processes and Consumer Behaviour

Developing and Promoting Goods and Services

Pricing and Distributing Goods and Services

Understanding Money and Banking

Understanding Securities and Investments

Financial Decisions and Risk Management

Filters

Exam 14: Understanding Accounting Issues

An asset is

Andy's line of credit with a local bank is likely a(n)

There are really only two users of accounting information: the business managers whose activities have generated the information,and the government taxation officials who tax the business.

The current ratio is an example of ________,while earnings per share is an example of __________:

At Lexi Corp.,sales revenue is $20 million,the cost of goods sold is $14 million,operating expenses are $3 million,and income taxes are $1 million.What is the company's operating income?

What is the formula for inventory turnover?

Liabilities reflected on the balance sheet are divided into two general categories: current (debts to be paid within one year)and long term (due more than a year into the future).

What does the debt-to-owners'-equity ratio tell us?

Goodwill is the amount paid for an existing business beyond the value of its tangible assets.

Under which condition is owners' equity positive?

A(n)________ is a debt owed by a firm to an outside organization or individual.

A current asset is

One manager (Adam)says that the income statement should be strong this year because the company has achieved a high level of sales revenue.Another manager (Eve)says that even with strong sales revenue,the income statement might not look particularly good.What is Adam assuming?

A long-term liability is

Forensic accountants are sometimes used to

Madeline wants to determine operating income for her company.To do so,she must subtract both the cost of goods sold and all operating expenses from gross sales revenue.

Financial statements fall into three broad categories,which are

If the following facts are known,which one would NOT strengthen the argument that a company must closely monitor its cash flow?

Intangible assets like patents,trademarks,and copyrights are included in owners' equity.

Understanding the Canadian Business System

Understanding the Environments of Business

Conducting Business Ethically and Responsibly

Understanding Entrepreneurship, small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Managing Human Resources

Understanding Labourmanagement Relations

Motivating and Leading Employees

Producing Goods and Services

Increasing Productivity and Quality

Managing Information Systems and Communication Technology

Understanding Marketing Processes and Consumer Behaviour

Developing and Promoting Goods and Services

Pricing and Distributing Goods and Services

Understanding Money and Banking

Understanding Securities and Investments

Financial Decisions and Risk Management

Filters

The current ratio is an example of ,while earnings per share is an example of __: