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Exam 17: Understanding Accounting and Financial Information

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Question 1

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The reports and financial statements prepared by accountants

A) are more useful for profit-seeking businesses than they are for not-for-profit organizations.
B) are mainly used to help the firm complete its tax forms.
C) provide information that can be used by decision makers both inside and outside the organization.
D) are not as useful now that firms have moved into a more global environment.

E) None of the above
F) A) and B)

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Question 2

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Brody has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves

A) posting the results of these statements to the appropriate journal.
B) analyzing the firm's financial statements to evaluate the financial condition of the firm.
C) conducting forensic tests of the data to ensure its accuracy.
D) placing the data used to construct the statements into an archive known as a data warehouse.

E) A) and B)
F) B) and D)

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Question 3

Multiple Choice

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The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?

Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Nathan works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Nathan's next task is likely to be

Blake took a marketing class at the local community college before starting his landscape business. He decided that his time would be better utilized in this class because if he could learn to sell his services well, the revenues and profits would follow. Your assessment of his plan might include which of the following?

As U.S. firms focus on cost cutting in order to stay competitive with producers in low-wage countries, they will rely on ________ to create strategies to help reduce costs.

_______ refers to the value that stockholders or owners have in a company.

A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.

The balance sheet is composed of the following types of accounts:

Net income before taxes is found by deducting total operating expenses from gross profit before factoring tax expense.

If a firm has a debt to owners' equity ratio of .75 (or 75%) we can conclude that

Coolest Closet, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to

Cash flow difficulties are unlikely for a firm that is profitable.

Inputs to the accounting system include sales documents.

Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants.

Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

The purpose of a trial balance is to prepare a practice balance sheet.

The balance sheet reports revenues and selling costs for a period of time.