Exam 5: Foundations of Financial Reporting and the Classified Balance Sheet

According to the FASB,the usefulness of accounting is judged by which of the following two qualitative characteristics of accounting information?

A company's management can improve overall profitability by decreasing the profit margin, the asset turnover,or both.

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

A company with a current ratio of 1.0 is considered more liquid than a company with a current ratio of 2.0.

The user can depend on the accuracy of financial information when which of the following qualitative characteristics has been followed?

Describe how the current ratio is calculated.If a company has a very low current ratio,what might this mean? If a company has a very high current ratio,what might this mean?

Intangible assets could include all except

Which of the following is expressed in terms of a percentage?

Although a garbage can that costs $25 is a long-term asset,it can be expensed because the amount is immaterial and will not affect anyone's decision making.

A debt to equity ratio of 0.5 means that one-third of a company's total assets are financed by creditors.

Relevance is comprised of all of the following except

Use this information to answer the following question. The total dollar amount of assets to be classified as current assets is

Profit margin and gross margin are the same thing.

The main differences among the balance sheets of the sole proprietorship,the partnership,and the corporation are found in the current assets and current liabilities sections.

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

The Retained Earnings portion of a corporation represents the initial contribution of capital to the business.

The convention of consistency refers to consistent use of accounting principles

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

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

The two parts of a corporation's stockholders' equity section are contributed capital and retained earnings.