Cost of Goods Sold is calculated using which of the following?
Sales + Gross Profit + Beginning Inventory - Ending
Inventory
Beginning
Inventory + Cost of Goods Purchased - Ending Inventory
Beginning Inventory - Cost of Goods Purchased +
Ending Inventory
Sales - Cost of Goods Purchased + Beginning
Inventory - Ending Inventory
What category would cash paid for taxes fall under?
Cash flows from accounting activities
Cash flows from investing activities
Cash flows from
operating activities
Cash flows from credit activities
Which item does not depreciate?
Manufacturing Equipment
Goodwill
Factory Building
What is the basic accounting equation used to calculate the balance sheet?
Assets = Securities + Stockholders Equity
Profit = Liabilities + Stockholders Equity
Assets =
Liabilities + Stockholders Equity
Capital = Liabilities + Stockholders Assets
Which of the following is NOT one of the four basic financial statements?
Statement of Cash Flows
Income Statement
Audit Statement
Balance Sheet
What information is found on the Balance Sheet?
Revenues, Expenses, Net Profit or Loss
Assets,
Liabilities and Shareholder's Equity
Gross Profit, Cost of Goods Sold and Net Income
Cash inflows and Cash outflows from Operating,
Investing and Financing Activities
What is GAAP, and why is it important?
Greatly Anticipated Accounting Principles; These
principles were set because the IRS is anticipating payment.
Generally Acknowledged Accounting Principles; It is
important because taxation isn't an exact science and the goal is to be
approximate in tax payment.
Generally
Accepted Accounting Principles; It is important because it is responsible for
standardizing accounting procedures.
Greatly Appreciated Accounting Practices; It is
important because the IRS appreciates your taxes.
What is the calculation used on the income statement?
Liabilities – Expenses = Net Income
Revenues – Equity = Net Income
Revenues –
Expenses = Net Income
Liabilities – Assets = Net Income
What sources of cash flow are included on the statement of cash flows?
Cash flows from credit activities, expansion
activities, and marketing activities
Cash flows from employment activities, research
activities, and financing activities
Cash flows from credit activities, investing
activities, and marketing activities
Cash flows from
operating activities, investing activities, and financing activities
What are revenues?
Income from liabilities
Income from assets
Income from
goods or services that have been sold
Income from investments
What should balance on a company’s balance sheet?
Deferred Assets and Deferred Credits
Total Assets and
the sum of Liabilities and Shareholders’ Equity
Revenues and Expenses
Accounts Payable and Accounts Receivable
What audience is an annual report addressing?
Shareholders
Other businesses
The media
Environmental groups
On a balance sheet, goodwill is an example of what?
Deferred Liabilities
Charitable Donations
Accounts Receivable
Intangible
Assets
What agency does a publicly traded company file with if they sell stock?
The Federal Reserve
The Securities
Exchange Commission
Central Intelligence Agency
National Security Agency
What are retained earnings?
Earnings that have been converted into stock
Earnings that
have been reinvested back into the business
Earnings that have been converted into assets
Earnings that have been paid out as salaries
True or False? Liabilities and shareholders’ equity must be equal.
False
True
What is another name for the Balance Sheet?
Statement of Earnings
Statement of Profitability and Loss
Statement of
Financial Position
Statement of Operations
Which of the following is NOT a division of sources and uses of cash flow on the cash flow statement?
Operating activities
Material
business activities
Investing activities
Financing activities
Which two line items are used to calculate Working Capital?
All Assets and All Liabilities
Current Assets
and Current Liabilities
Retained Earnings and Total Liabilities
Fixed Assets and Long-term Liabilities
What information is found on the Income Statement?
Assets, Liabilities and Shareholder's Equity
Cash inflows and Cash outflows from Operating,
Investing and Financing activities
Revenues,
Expenses, Net Profit or Loss
Retained Earnings, Accumulated Depreciation and
Shareholders Equity
What is an example of a liability?
A property tax
bill
Equipment
Stocks owned by the business
Cash
A company’s working capital is defined as
Current assets
minus current liabilities
Accounts receivable minus accounts payable
Revenues minus expenses
Current assets plus long-term assets
Which of the following is NOT a primary section of a company’s financial statements?
Summary of Operations
Balance Sheet
Letter from the
CEO
Statement of Cash Flows
Of the following, which is an item that doesn't belong in the heading of a balance sheet?
Title of the statement
Name of the entity
Specific date of the statement
Address of the
business
Why would investors have an interest in a company's statement of retained earnings?
Investors want to know that the products being sold
are ones they believe are good quality
Investors want to know that a company is
reinvesting enough of their earnings to expand vertically
Investors want
to know that a company is reinvesting enough of their earnings to support
future growth and pay dividends
Investors want to know that a company is
reinvesting enough of their earnings to expand into other industries
Almost all financial statements use what form of accounting?
Cash basis accounting
Cost basis accounting
Accrual basis
accounting
Voodoo accounting
When goods have been sold but not paid for, where are they documented in the balance sheet?
As assets.
As accounts
receivable.
As accounts payables.
As liabilities.
What happens to retained earnings as dividends are declared?
Dividends do not affect retained earnings.
Retained earnings increase.
Retained earnings stay the same.
Retained
earnings decrease.
Current assets do NOT include which of the following
Accounts receivable
Machinery and
equipment
Cash on hand
Securities
What does it mean when a company's stock is volatile?
The value of the
stock often changes drastically
The companies stock is stable but expensive
The companies stock is rising quickly
The companies stock is sinking quickly
When are current liabilities due to be paid?
On the date of the balance sheet
Within the next three months
Within the next 60 days
Within the next
12 months
True or False? All expenses required to be paid in the same accounting period.
False
True
What four components are contained in a financial statement?
Balance sheet,
income statement, statement of retained earnings, statement of cash flow
Balance sheet, auditing form, statement of retained
earnings, statement of cash flow
Statement sheet, income statement, statement of
retained earnings, statement of cash flow
Balance sheet, income statement, annual report,
statement of cash flow
A measure of the overall efficiency of asset utilization is the:
Earnings Per Share
Asset Turnover
Ratio
Acid-test Ratio
Receivable Turnover Ratio
On a balance sheet, which of the following is subject to depreciation?
All assets
All long-term assets including land
All long-term
assets except for land
All assets and liabilities
Is net income equal to the net cash generated by operations? Where is net cash reported?
No. Net cash is
reported on the cash flow statement.
No. Net cash is spending money that does not need
to be reported.
No. Net cash is placed into a special account.
Yes. Net cash is reported as net income.
The income statement is also called what?
Statement of
earnings
Balance sheet
Statement of retained income
Statement of cash flows
What is the objective of financial statement analysis?
To understand how to properly address shareholders
To understand whether a product is worth buying
To understand
the risk vs. profitability of a company
To better understand how to report earnings to the
Federal Reserve
Which corporate officers must certify the accuracy of financial statements?
CEO and CFO
COO and Comptroller
Treasurer and Chair of the Board
Any two senior corporate officers
What is the order in which assets are typically listed on the balance sheet?
In order of acquisition
In order of
liquidity
In order of value
In alphabetical order
What equation is used when calculating the statement of retained earnings?
Beginning
Retained Earnings + Net Income – Dividends = Ending Retained Earnings
Beginning Retained Earnings + Liabilities –
Dividends = Ending Retained Earnings
Beginning Retained Earnings + Net Income – Ending
Retained Earnings = Dividends
Beginning Retained Earnings + Net Income – Assets =
Ending Retained Earnings
Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment are referred to as:
Capital
Expenditures
Revenue Expenditure
Capital Assets
Operational Expenditures
How is the return on assets calculated?
Gross margin divided by total assets
Net income
divided by total assets
Gross revenues divided by total assets
Tangible assets divided by intangible assets
What does the statement of retained earnings tell you about a company's position?
It tells you how much has been earned
It tells you how much the company is paying their
employees
It tells you how
it has been affected by net income and distribution of dividends
It tells you what items would be best to sell in
the following year
What do the footnotes to financial statements typically provide?
an overview of significant accounting policies
A review of stock compensation plans
All of these
A discussion of contingencies potentially affecting
earnings
What is the first statement to calculate before moving on to the statement of retained earnings?
The statement of cash flows.
Statement of dividends.
The balance sheet.
Income
statement.
Current assets are assets that are intended to be converted into cash or consumed within:
The Inventory Cycle
Two Years
One year
The Operating Cycle
What's the difference between a Capital lease and an Operational lease?
Capital leases are fixed while Operational leases
are variable.
Capital leases are variable while Operational
leases are fixed.
Capital leases
are traditionally used for long-term leases while Operational leases are for
short-term leases.
Capital leases are traditionally used for
short-term leases while Operational leases are for long-term leases.
Which component of a financial statement will tell you, ultimately, whether a company has earned or lost money?
Statement of cash flows
The balance sheet
Statement of retained earnings
Income statement
All are Profitability Ratios, except:
Return On Assets
Return On Equity
Return On Capital Employed
Current Ratio
Income from Operations is equal to Gross Profit less:
Cost of Goods Sold
Operating
Expenses
Other Expenses
Financing Expenses
True or false? A company can never have negative income tax liabilities.
False
True
What is Goodwill?
An asset that
captures the excess purchase price of an acquired business bought
for greater than fair market value.
An asset that is recorded to adjust year-end
changes to long-term assets on the Balance Sheet.
A liability that causes the valuation of a company
to fall below fair market value.
An asset category that captures all of the
intangible assets of a company.
How do you calculate the Current Ratio?
Total Assets / Total Liabilities
Total Current
Assets / Total Current Liabilities
Net Income / Net Revenue
(Current assets – Inventories) / Current
Liabilities
Companies report accounts receivable at:
Gross Realizable Value
Net Realizable
Value
Cumulative Gross Value
Liquidation Value
If you needed to replace machinery at your company, where would you list this on the statement of cash flows?
Under cash flows
from investing activities
Under cash flows from purchasing activities
Under cash flows from accounting activities
Under cash flows from cash activities
When all statements and documents are collated, what activity does it allow investors to partake in?
Business
valuation
Patent valuation
Cash flow analysis
Product valuation
Parentheses around a number in financial statements indicates what?
The number is a
loss or decrease
The number is an estimate
the number is very important
The number is a gain or increase
EBITDA is Operating Profit:
Before Cost of Goods Sold
Before Gross Profit
After Deprecition and Amortization
Before
Depreciation and Amortization
When profits are reinvested into the business, what are they called?
Retained money
Contributed equity
Retained
earnings
Contributed capital
What is ROE, and why is it important?
Return on equity; It is important because it tells
you the amount of gross income returned as a percentage of creditors equity
Return on equity; It is important because it tells
you the amount of gross income returned as a percentage of shareholders equity
Return on equity; It is important because it tells
you the amount of dividends returned as a percentage of shareholders equity
Return on
equity; It is important because it tells you the amount of net income returned
as a percentage of shareholders equity
SOX stands for:
none of these
Standard Operation and Execution
Simple Options Exchange
The
Sarbanes-Oxley Act
How will a business acquisition typically impact a company’s cash flow?
increase
decrease
make no change to
Which of the following is NOT a component of the acronym EBITDA?
Depreciation
Interest
Assets
Earnings
How are retained earnings calculated?
Total assets minus liabilities
Net income minus
dividends
Gross income minus expenses
Gross revenues minus expenses
What is the overall objective of using ratio analysis?
Determine the business's liquidity
Evaluate how
well the business is using its resources
(none of these are correct)
Evaluate the company's return on investment
How do you calculate the Quick Ratio?
Gross Profit / Net Revenue
(Current assets
– Inventories) / Current Liabilities
Total Current Assets / Total Current Liabilities
Total Liabilities / Total Assets
Analysis of risk has what intention?
Understand a company's competitive advantage
Revealing a
company's credit risk
Revealing a company's ethical standards
Revealing a company's environmental risk
Which of the following would be reported as a cash inflow from investing activities?
Proceeds from selling shares of the company
Cash paid to retire bonds
Cash paid for dividends
Proceeds from
selling investments in the equity securities of other companies
Which items are traditionally disclosed separately on an Income Statement?
Payroll expense, rent expense and operating income
Gross profit, operating profit and net profit
Repairs and Maintenance, operating profit and gross
profit
Extraordinary
items, changes in accounting principles and discontinued operations
Which of the following is NOT a method of calculating depreciation?
Straight-line method
Declining balance method
Activity method
Mechanical
valuation method
What is an accounting entity?
An entity that must be included with all the other
accounting entities
An undefined unit that is recognized, but not
accounted for
A clearly
defined unit that must be accounted for separately
A clearly defined unit that must be accounted for
with the rest of the units
The Dividend Payout Ratio is calculated by dividing total dividends by:
Net Income
Income before Interest and Taxes
Revenues
Income before Taxes
What does it mean when a company's change in cash is negative?
The company has earned enough money to repay its
creditors.
The company did
not make enough money to repay creditors, pay dividends for the next year.
Cash flows from business activities are superseding
that of the prior year.
Which of the following is not an element included in the statement of retained earnings?
Dividends
Beginning-of-the-year retained earnings
Stockholder
equity
Net income
Within the context of stockholders equity, what are cash and other assets considered?
Profits
More stockholders equity
Contributed
capital
Liabilities
Which of the following is NOT one of the four GAAP principles?
Market value
principle
Revenue recognition principle
Full disclosure principle
Matching principle
What is the final line of the statement of operations?
Net after-tax
profits
Profit margin
Price-to-earnings ratio
Gross profits minus expenses
Gross profit equals
Gross revenues minus expenses
Net revenues minus taxes
Net revenues
minus cost of sales
Assets minus liabilities
Where would an entry be made for the purchase of goods or services without a contract or note?
Under assets as accounts receivable
Under contracts as notes payable
Under assets as goods receivable
Under
liabilities as accounts payable
What does a company’s debt-to-equity ratio describe?
When a company will go bankrupt
The nature of
the company’s capitalization
The relationship between current liabilities and
shares outstanding
Shares of stock purchased on credit
Which value appears on all three components of financial statements?
Accounts receivable
Taxes paid
Gross revenues
Net profits
When you have finished calculating your statement of cash flows, where is the final result transferred to?
The balance
sheet.
The income statement.
The statement of retained earnings.
The statement of cash flows.
Which entity is primarily responsible for setting accounting standards?
the FASB
the SEC
the AICPA
the GAAP
Why would a creditor heavily scrutinize a company's statement of retained earnings?
Every dollar
that is paid to the stockholders as dividends is a dollar not available to pay
back its debt.
It tells the creditor how much debt the company is
in.
Every dollar that is paid to the creditor is a
dollar not available to pay back its debt.
It gives the creditor insight as to whether it
should buy the companies stock.
Which of the following does NOT increase cash flows?
Increase in accounts payable
Collection of notes receivable
Increase in
accounts receivable
Decrease in inventory
On which Financial Statement(s) are Discontinued Operations reported?
Statement of Cash Flows
Income Statement
Balance Sheet and Income Statement
Balance Sheet
Two figures must be transferred to the balance sheet before the final result can be calculated. What are they, and where are they transferred from?
Retained
earnings from the statement of retained earnings, and cash from the statement
of cash flows.
Retained earnings from the income statement, and
cash from the statement of cash flows.
Retained earnings from the statement of retained
earnings, and cash from the balance sheet.
Retained earnings from the income statement, and
cash from the balance sheet.
A financial statement is a smaller piece of a much larger annual document submitted to the Securities Exchange Commission. What is the name of the document?
Annual report.
10K
10Q
W-2
Which of the following activities would be regarded as a financing activity on the Statement of Cash Flows?
Dividend
distributions
Profits earned from the sale of other companies
stocks
Employee wages
Loans made to other businesses
True or false? A declared dividend decreases shareholders’ equity.
False
True
In the DuPont system, what is the Return On Equity equal to?
Net Profit Margin times Sales times Equity
Multiplier
Sales times Asset Turnover
Profit Margin
times Total Asset Turnover times Equity Multiplier
Net Profit Margin times Fixed Assets times Equity
Multiplier
Using the financial statements, how is Free Cash Flow calculated?
EBIT(1-Tax Rate)
+ Depreciation & Amortization - Change in Net Working Capital - Capital
Expenditures
EBITDA - Depreciation & Amortization + Change
in Net Working Capital + Capital Expenditures
EBIT - Depreciation & Amortization + Change in
Net Working Capital - Capital Expenditures
EBIT(1-Tax Rate) + Depreciation & Amortization
- Change in Net Working Capital
What are the two basic formats of the Income Statement?
Accural Basis and Single-Step
Single-Step and
Multi-Step
Accrual Basis and Multiple-Step.
Cash Basis and Single-Step.
Which of the following is NOT a potential off-balance-sheet liability?
Long-term lease obligations
Pension obligations
Undisclosed subsidiaries or partnerships
Reserve for bad debts
(none of these)
In preparing consolidated financial statements, which type of transaction is NOT wholly or partially eliminated?
Purchases and sales within the company
Parent company investments in a subsidiary
Interest revenue and expenses on loans within the
company
Parent company
stock repurchases
On a classified Balance Sheet, the asset line items appear in which order?
Current Assets; Property, Plant, and Equipment;
Long-term Investments; Intangible Assets; Other Assets
Current Assets; Intangible Assets; Property, Plant,
and Equipment; Long-term Investments; Other Assets
Current Assets; Other Assets; Long-term Investments;
Intangible Assets; Property, Plant, and Equipment
Current Assets;
Long-term Investments; Property, Plant, and Equipment; Intangible Assets; Other
Assets
