FS F A S A – – Rev i Rev e i w (C w 1 (C - 1 5 - ) 5
1. A common-size balance sheet portrays the firm's accounts as a percent of the: firm's total assets.
2. A company reports net income when services provided are greater than the cost to provide the services
3. A patent is listed under which category? intangible assets
4. A patent on a new drug will be reported under intangible assets
5. ABC’s purchase during the year were $ 100.000. The balance sheet shows an average
accounts payable balance of $ 12.000. ABC’s payable payment period is closest to: 44 days
6. Accrued expenses is expenses False
7. An accrued expense is an expense that has been incurred but not yet paid for
8. An accrued expense is an expense that has been incurred but not yet paid for
9. An analyst who is interested in a company’s long term solvency would most likely
examine the: fixed charge coverage ratio.
10. An examination of accounting records to determine if the records and reports are in
accordance with generally accepted accounting standards is called an audit
11. An investor uses the income statement to determine how much a company has
earned for a given period of time
12. An investor uses the income statement to determine how much a company has
earned for a given period of time
13. Asset categories would include all of the following except: contingent assets
14. Cash transactions related to common stock are reported in which section of the cash flow statement? financing
15. Collections from customers IS True
16. Cost of good sold is Revenue False
17. Dividends paid to shareholders is a direct reduction to retained earnings
18. Economic resources is the technical term for assets
19. Goodwill is recorded when it is paid for when purchasing another company
20. How would you interpret an interval measure of 50 days? The firm can pay its
expenses for at least 50 days.
21. If net income after tax is $42,000, the tax rate is 30%, and total expenses not including
tax expense are $126,000, revenues must be: $186,000
22. Intangible assets are not really a real asset
23. Issuing bonds would be classified as: Financing cash flow
24. Liabilities are obligations resulting from past transactions
25. Liability categories would include which of the following: current liabilities
26. Office supplies is listed under which category? current assets
27. Prepaid expenses is an asset because the company has paid ahead and therefore has future benefit
28. Prepaid insurance expense is expense False
29. Property, plant and equipment is used to produce revenues over a long period of time
30. Providing services to customers IS Revenues True
31. Retained earnings IS Owner’s equity
32. Return on equity using the traditional Dupont formula equals: net profit margin x
total asset turnover x financial leverage multiplier
33. Revenues are technically defined as amounts earned from providing goods and services
34. Revenues are technically defined as amounts earned from providing goods and services
35. Sales of inventory would be classified as: Operating cash flow
36. The accounting equation is assets = liabilities + equity
37. The accrual method of accounting requires revenues to be recorded when earned
38. The balance sheet reports assets, liabilities and equity at a point in time
39. The balance sheet will be used by an investor to answer which of the following
questions? how much the company earned this period
40. The financial statement that reports what the company owns and what the company owes is the balance sheet
41. The government agency with legal authority over financial reporting of U.S. public
companies is called financial accounting standards board (FASB)
42. The net working capital of a firm will decrease when accrued wages are paid with cash. False
43. The principle that states that all expenses incurred in the revenue process should be
recorded in the same period as the revenue generated is the matching principle
44. The principle that states that all expenses incurred in the revenue process should be
recorded in the same period as the revenue generated is the matching principle
45. The purpose of financial accounting is to provide financial information to external users
46. The sum of the payout ratio and the plowback ratio will always equal 1.0. True
47. Trademarks IS liability False
48. using the following information for ABC company: EBIT / revenue = 10%. Tax
retention rate = 60%. Revenue/ Assets = 1.8 times. Current ratio = 3 times. EBT/ EBIT
= 0.9 times. Assets/ Equity = 1.9 times. ABC’s return on equity is closest to: 18.5%
49. What categories are reported on the cash flow statement? operating, investing, financing
50. What is supposed to "balance" on the balance sheet? assets = liabilities + owner's equity
51. When a company records service revenue net income will increase
52. When total revenues are greater than total expenses, a company has a net income
53. When total revenues are greater than total expenses, a company has a net income
54. When Tri-C Corp. compares its ratios to industry averages, it has a higher current
ratio, an average quick ratio, and a low inventory turnover. What might you assume
about Tri-C? Its average inventory is too high.
55. Which accounts are typically included in stockholders equity? common stock
56. Which financial statement provides information related to the financial performance of
a company during a specific period? income statement
57. Which of the following actions will increase a firm's current ratio if it is now less than
1.0? Buy inventory with short term credit (i.e. accounts payable).
58. Which of the following expenses is usually listed towards the bottom of the income statement? tax expense
59. Which of the following expenses is usually listed towards the bottom of the income statement? tax expense
60. Which of the following is a condition that must be met for revenue to be recognized on
the income statement? delivery of goods or services has occurred
61. Which of the following is a condition that must be met for revenue to be recognized on
the income statement? delivery of goods or services has occurred
62. Which of the following is a current liability? inventory
63. Which of the following is a true statement? Revenue is recognized when it is earned
64. Which of the following is a true statement? Revenue is recognized when it is earned
65. Which of the following is considered an expense? cost of goods sold
66. Which of the following is for the specific purpose of reporting cash flows? cash flow statement
67. Which of the following is for the specific purpose of reporting cash flows? cash flow statement
68. Which of the following is least likely a change in cash flow from operations under
US.GAAP? A decrease in notes payable
69. Which of the following is least likely a limitation of financial ratios: Data on
comparable firms are difficult to acquire
70. Which of the following is not a true statement? net income and change in cash are the same thing
71. Which of the following is not a true statement? net income and change in cash are the same thing
72. Which of the following is not likely to cause a reduction in the NET WORKING
CAPITAL turnover ratio? Average payables have increased.
73. Which of the following items is least likely considered a cash flow from financing
activity under US.GAAP? Payment of interest on debt
74. Which of the following situations is a violation of the revenue recognition principle?
recording revenues when the cash is received and the service has not yet been provided
75. Which of the following statements is most likely correct for a firm with an average
collection period of 90 days? It is providing financing for approximately 25% of its annual sales.
76. Which of the following statements is not true relative to the statement of cash flows? it
does not show the amount spent for long term assets
77. Which of the following will allow your firm to achieve its targeted 16% ROA with an
asset turnover of 2.5? A profit margin of 6.4%.
78. Which of the following will be an expense on this period’s income statement? the
amount on the utility bill for services provided this period
79. Which of the following will be an expense on this period’s income statement? the
amount on the utility bill for services provided this period
80. Which of the following will be recorded as revenue in this period’s income statement?
the value of services provided this month
81. Which of the following will be recorded as revenue in this period’s income statement?
the value of services provided this month
82. Which of the following would be least likely to cause a change in investing cash flow?
An increase in depreciation expense
83. Which statement provides information on goods and services provided to customers? income statement