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Exam 17: Understanding Accounting and Financial Information

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Question 151

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The best way for a firm to avoid serious cash flow problems is to sustain a rapid growth in sales.

A) True
B) False

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Question 152

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Expenses a firm incurs for insurance,office salaries,and rent are classified as:

A) Selling expenses on an income statement.
B) General expenses on an income statement.
C) Current liabilities on a balance sheet.
D) General expenses on a cash flow statement.

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

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Question 153

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As a certified public accountant CPA),Kay might become involved in helping clients select appropriate accounting computer software for their firm. Many big public accounting firms earn a sizable percentage of revenues from consulting and other services.Public accountants may design an accounting system for a firm,and help select the appropriate computer and software to run the system.

Referring to an accounting system,inputs refers to events and transactions that occur within the business,while outputs refers to the journal entries and ledger categorization that occurs after the events and transactions are recorded.

The inventory turnover ratio for all firms should be greater than 2 times.

Accountants do the work involved in recording financial events and transactions,but the actual classifying and interpreting of this data is left to financial managers.

The income statement computes net income by subtracting liabilities from assets.

When companies owe money to creditors,suppliers,and others,these outstanding amounts are recorded on the balance sheet as __________.

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.

Accounting transactions are very important to a firm's operations.Which of the following activities would affect the firm's account balances?

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:

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Bob Stewart plans to visit his financial planner today to discuss investment strategy.As a young,"20 something" accountant,he knows he can afford to invest in a few riskier investments.Which of the following ratios will be an important measure of profitability for Bob?

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.

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.

Explain the difference between current,fixed,and intangible assets.Give two examples of each of these different types of assets.

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

Jasmine is categorizing journal entries in order to post to the ________.

Bookkeeping is part of the accounting cycle,but accounting goes far beyond the activities involved in bookkeeping.

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.