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Exam 17: Understanding Accounting and Financial Information

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Question 91

Multiple Choice

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Accountant Alan Wingspan 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 D)
F) A) and C)

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Question 92

True/False

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

A) True
B) False

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Question 93

Multiple Choice

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Many business decisions are made in hopes of improving a firm's "bottom line." Which of the following financial statements will reveal a firm's "bottom line"?

A company's income statement is important to accountants and other stakeholders.It reveals:

Revenue,minus cost of goods sold = ____________.

A person's pulse rate and blood pressure are indicators of a person's health.Similarly,_________ can help assess the health of a business.

Assets are reported on the firm's balance sheet.

According to the Legal Briefcase box in Chapter 17,a forensic accountant investigates company records for evidence of fraud.

Financial ratios are used to analyze a firm's financial condition and financial performance.

Keith will graduate from Southern State University this year.He has accumulated $18,000 in student loans during his four years at college.An accountant would classify the loans as:

Hap owns and operates a small business with only four full-time employees and less than $500,000 in annual sales.He currently uses a manual accounting system and relies on a part-time bookkeeper to keep his records in order.In evaluating the possible adoption of a computerized accounting system,Hap will probably discover that:

Unfortunately,during bad economic times,and a fear of job loss,company executives are more likely to ask an accountant to "cook the books." If a boss or manager should ask a staff accountant to change data to make the firm's financial position look better in the eyes of investors,what are the accountant's alternatives?

The Sarbanes-Oxley Act strengthens the protection for whistleblowers who report wrongful actions of company officers.

A hospital emergency room serves several patients from a ten car pile-up on the local interstate.Most of the victims require bandages,antibiotics,foot and arm casts,topical ointments,and pain pills.These items are part of the costs of good sold for the hospital emergency room.

The cost of goods sold reflects the selling price of the merchandise sold over a period of time.

Juliet has found that her small business needs a better way to maintain accounting records and analyze business opportunities.Currently,she uses a manual accounting system.These days,any off-the-shelf accounting package available at a local software retailer should do an excellent job of meeting her firm's accounting needs.

Oklahoma Chemicals plans to use its computers to post information from journals to the ledger instantaneously.One obvious benefit of this technology is:

Which of the following items is found on an income statement?

It is impossible to run a company effectively without the ability to read and understand basic accounting reports and financial statements.

One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry.