Question 1

The five economic attributes that are normally studied are demand, supply, manufacturing, ____________________, and investing and financing.

Accepted Answer

The answer of The five economic attributes that are normally...

Question 2

Accounts receivable represent:
A) amounts which are due to stockholders.
B) amounts which have been borrowed to finance operations.
C) amounts which are owed to the company by its customers resulting from credit sales.
D) amounts which are owed by the company to its suppliers for past purchases.

Accepted Answer

Accounts receivable are amounts owed to the company by its customers resulting from credit sales. They represent the company's expectation to receive payment from its customers in the future. A is incorrect as stockholders do not owe money to the company. B is incorrect as borrowed amounts are represented by liabilities, not accounts receivable. D is incorrect as amounts owed by the company to suppliers represent accounts payable, not accounts receivable.

Question 3

The two categories of shareholders' equity usually found on the balance sheet of a corporation are
A) contributed capital and property, plant, and equipment.
B) retained earnings and notes payable.
C) common stock and retained earnings.
D) contributed capital and equity securities.

Accepted Answer

The two categories of shareholders' equity usually found on the balance sheet of a corporation are common stock and retained earnings. Contributed capital and equity securities are both types of common stock, and property, plant, and equipment and notes payable are not part of shareholders' equity. Retained earnings refer to the portion of a corporation's earnings that have been kept (retained) by the company rather than paid out as dividends to shareholders. Common stock represents ownership in the company and is typically purchased by investors through an initial public offering (IPO) or secondary offering.

Question 4

The first step in financial statement analysis is to identify the __________________________________________________ of the industry in which a firm participates.

Accepted Answer

The answer of The first step in financial statement analysis...

Question 5

Net income is equal to:
A) Assets minus Liabilities
B) Revenues and Gains minus Expenses and Losses
C) Shareholders' Equity minus Assets
D) Revenues and Assets minus Expenses and Liabilities

Accepted Answer

Net income is calculated as revenues and gains minus expenses and losses. This represents the profit or loss of a company for a given period of time.

Question 6

Another important step in financial statement analysis is to assess the quality of a firm's ________________________________________ and if necessary adjust them for such characteristics as sustainability or comparability.

Accepted Answer

The answer of Another important step in financial statement analysis...

Question 7

Which of the following is not considered to be a liability?
A) wages payable.
B) accounts payable.
C) notes payable.
D) cost of goods sold.

Accepted Answer

Cost of goods sold is not a liability, but rather an expense account that is used to record the cost of goods that have been sold during a given period. Wages payable, accounts payable, and notes payable are all examples of liabilities, since they represent amounts that a company owes to others but have not yet been paid.

Question 8

Assets for a particular business might include
A) cash, retained earnings, and accounts payable.
B) cash, common shareholders' equity, and accounts receivable.
C) cash, property, plant, and equipment, and accumulated other comprehensive income.
D) cash, inventories, and goodwill.

Accepted Answer

Assets for a business include tangible and intangible items of value it owns, such as cash, inventories, and goodwill. Retained earnings, common shareholders' equity, accounts payable, and accumulated other comprehensive income are not assets but rather elements of equity and liabilities.

Question 9

All of the following are principal provisions of the Sarbanes-Oxley Act of 2002 except:
A) At least one member of the audit committee of the board of directors must be a "financial expert."
B) The lead audit or coordinating partner and the reviewing partner of the public accounting firm must rotate, or change, every five years.
C) The firm's chief executive officer and the chief financial officer must issue a statement along with the audit report stating that the financial statements and notes fairly present the operations and financial position of the firm.
D) The FASB has oversight and enforcement authority over the SEC.

Accepted Answer

The Sarbanes-Oxley Act of 2002 did not give the Financial Accounting Standards Board (FASB) oversight and enforcement authority over the SEC. The FASB is an independent organization that sets accounting standards, while the SEC is a government agency that regulates and enforces securities laws. The other three provisions listed (the requirement for a financial expert on the audit committee, partner rotation, and CEO/CFO certification of financial statements) are indeed principal provisions of the act.

Question 10

When identifying the strategies that a particular firm pursues to gain a competitive advantage it is important to determine if its products are designed to meet the needs of a specific market segment or are they intended for a _____________________________________________.

Accepted Answer

The answer of When identifying the strategies that a particular...

Question 11

On the statement of cash flows, an amount paid for utilities would be classified as
A) a financing activity.
B) an operating activity.
C) an investing activity.
D) a noncash activity.

Accepted Answer

Utility expenses are typical operating expenses and therefore would fall under operating activities on the statement of cash flows.

Question 12

The fourth step in financial statement analysis is using the financial statements to analyze the current ____________________ and ____________________ of the firm.

Accepted Answer

The answer of The fourth step in financial statement analysis...

Question 13

The tools of effective financial statement analysis are also useful for assessing whether to extend ____________________ to a firm, either for a short-term or for a long-term.

Accepted Answer

The answer of The tools of effective financial statement analysis...

Question 14

Which financial statement for a business would you look at to determine the company's earnings performance during an accounting period?
A) balance sheet.
B) income statement.
C) statement of cash flows.
D) the Management Assessment.

Accepted Answer

The income statement shows the company's revenues and expenses during an accounting period, ultimately resulting in its net income or loss. This is the best financial statement to determine a company's earnings performance. The balance sheet shows a company's assets, liabilities, and equity at a specific point in time, while the statement of cash flows shows the changes in a company's cash and cash equivalents during an accounting period. The Management Assessment is not a financial statement.

Question 15

Normally, intense rivalries have a tendency to reduce ____________________.

Accepted Answer

The answer of Normally, intense rivalries have a tendency to...

Question 16

Which form does the balance sheet equation take in the United Kingdom?
A) Noncurrent Assets + Noncurrent Liabilities = Shareholders' Equity
B) Revenues - Expenses = Shareholders' Equity
C) Noncurrent Assets + [Current assets - Current Liabilities] - Noncurrent Liabilities = Shareholders' Equity
D) Noncurrent Assets - Current assets = Noncurrent Liabilities - Current Liabilities + Shareholders' Equity

Accepted Answer

The balance sheet equation in the United Kingdom takes the form of Noncurrent Assets + [Current assets - Current Liabilities] - Noncurrent Liabilities = Shareholders' Equity. This means that the assets owned by the company that are expected to provide benefits for more than one accounting period are added together with the current assets minus current liabilities to arrive at the total assets. Noncurrent liabilities are then subtracted from this figure to arrive at shareholders' equity.

Question 17

The ______________________________ sets forth the sequence of activities involved in the creation, manufacture and distribution of its products and services.

Accepted Answer

The answer of The ______________________________ sets forth the sequence of...

Question 18

Why is the operating activities section of the statement of cash flows often believed to be the most important part of the statement?
A) Because it shows the dividends that have been paid to stockholders.
B) Because it indicates a company's ability to generate cash from sales to meet current cash payments for goods or services.
C) Because shows the net increase or decrease in cash during the period.
D) Because it gives the most information about how operations have been financed.

Accepted Answer

The operating activities section of the statement of cash flows shows the cash generated or used by a company's core operations, which is a key indicator of the company's ability to generate cash from sales to meet current cash payments for goods or services. This information is important to investors and creditors who evaluate a company's ability to continue operating and paying its debts. The other options listed (dividends paid, net increase or decrease in cash, and how operations have been financed) are also important but do not provide as much insight into the company's ability to generate cash from its core operations.

Question 19

The higher the value added from any activity, the higher should be the ____________________ from engaging in that activity.

Accepted Answer

The answer of The higher the value added from any...

Question 20

The threat of new entrants is measured by whether there are entry barriers, such as capital investment, ________________________________________, patents, or regulation that inhibit new entrants.

Accepted Answer

The answer of The threat of new entrants is measured...

Quiz 1: Overview of Financial Reporting, Financial Statement Analysis, and Valuation

The five economic attributes that are normally studied are demand, supply, manufacturing, ____________________, and investing and financing.

Accounts receivable represent:

The two categories of shareholders' equity usually found on the balance sheet of a corporation are

The first step in financial statement analysis is to identify the __________________________________________________ of the industry in which a firm participates.

Net income is equal to:

Another important step in financial statement analysis is to assess the quality of a firm's ________________________________________ and if necessary adjust them for such characteristics as sustainability or comparability.

Which of the following is not considered to be a liability?

Assets for a particular business might include

All of the following are principal provisions of the Sarbanes-Oxley Act of 2002 except:

When identifying the strategies that a particular firm pursues to gain a competitive advantage it is important to determine if its products are designed to meet the needs of a specific market segment or are they intended for a _____________________________________________.

On the statement of cash flows, an amount paid for utilities would be classified as

The fourth step in financial statement analysis is using the financial statements to analyze the current and of the firm.

The tools of effective financial statement analysis are also useful for assessing whether to extend ____________________ to a firm, either for a short-term or for a long-term.

Which financial statement for a business would you look at to determine the company's earnings performance during an accounting period?

Normally, intense rivalries have a tendency to reduce ____________________.

Which form does the balance sheet equation take in the United Kingdom?

The ______________________________ sets forth the sequence of activities involved in the creation, manufacture and distribution of its products and services.

Why is the operating activities section of the statement of cash flows often believed to be the most important part of the statement?

The higher the value added from any activity, the higher should be the ____________________ from engaging in that activity.

The threat of new entrants is measured by whether there are entry barriers, such as capital investment, ________________________________________, patents, or regulation that inhibit new entrants.