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Exam 16: Understanding Accounting and Financial Information

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Question 91

True/False

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One of the statements prepared in the accounting cycle is the statement of cash flows.

A) True
B) False

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Question 92

Multiple Choice

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________ measures the speed of inventory moving through the firm and its conversion into sales.

A) Asset turnover
B) Inventory turnover
C) Sales turnover
D) Cost of goods sold turnover

E) A) and B)
F) A) and C)

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Question 93

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Accountants at Rextech are seriously considering a change in the methods they use to depreciate equipment and value inventory.If they do so,the changes they make:

Accounting software has proven to be especially helpful for small business owners.

For the last several years Bill Havers has gone to accountant Chelsea Jones for help in preparing his personal income tax forms.He heard about Chelsea from his boss,who said she had done a good job helping the business design a new accounting system.Bill has been happy with Chelsea's work and feels that the fees she charges are quite reasonable.Chelsea would be classified as a(n)

Return on equity measures how much was earned for each dollar invested by the firm's creditors.

Bookkeepers would normally be involved with:

Good decisions are based on good information.That's why an organization needs accounting-to provide good information.

Liquidity refers to how fast an asset can be converted to cash.

The area of accounting that provides managers of an organization with information they need to make decisions is called:

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

Carol has worked as a bookkeeper for a small clothing store for almost three years.Her old boss recently retired and a new manager took over.The new manager frequently asks her for information and advice about how to interpret the information she records.Carol's experience as a bookkeeper means she is qualified to provide this type of advice.

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

On a balance sheet,what a firm owes to creditors would be listed under:

This morning Evelyn will be transferring information in her company's journals and posting them to the:

Net income is simply the difference between revenue and cost of goods sold.

According to generally accepted accounting principles,a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory.

Net income before taxes is found by deducting operating expenses from gross profit.

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.