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FIN 210 > CH 2 > Flashcards

CH 2 Flashcards

1
Q

In the United States, publicly traded companies, can choose whether or not, they wish to release periodic financial statements

A

False

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2
Q

Financial statements are optional accounting report issued periodically by affirm which present information on the past performance of the firm, a summary of the firms, assets, and the financing of those assets and production of the firms future performance

A

False

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3
Q

International financial report, standard, or taking route throughout the world however, it’s unlikely that the US will report accounting to IRFS Before the second half of the 21st country

A

False

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4
Q

What is the reason that is necessary for public companies to follow the rules and format set out in the generally accepted Accounting principal GAAP WHEN CREATING FINANCIAL STATEMENTS?
A) it ensures that the market value of asset and debt reported accurately
B) it ensures that information on the performance of public companies is reported on cash basis, Accounting
C) it ensures that important budgetary information is not omitted
D) it’s makes it easier to compare the financial result of different firms

A

D

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5
Q

Which of the following best describes why are firm produced financial statements?
A) to use as a tool, when planning future investment within an a firm
B) to increase the intrinsic value of a firm
C) to provide a means for interested outside parties, such as creditors to obtain information about a firm with an overview of the short and long-term financial conditions of a business
D) to show the daily act activities firm has undertaken in the previous financial year, and what activities are planned for the near future

A

C

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6
Q

The exchange in which of the following countries region, do NOT accept international financial reporting standards set out by the international Accounting standard board
A) Germany
B) France
C) United United
D) United Kingdom

A

C

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7
Q

Which of the following is not one of the financial statement that must be produced by a public company?
A) the balance sheet
B) the income statements
C) the statement of cash flow
D) the statement of activities

A

D

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8
Q

US public companies are required to file their annual financial statement with the US securities and exchange commission on which of
form?
A) 10-A
B) 10-K
C) 10-Q
D) 10-SEQ

A

B

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9
Q

Which of the following is not a financial statement that every public company is required to produce?
A) income statement
B) statement of source and use of cash
C) balance sheet
D) statement of stakeholder equity

A

B

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10
Q

The third-party who checks on financial statement to ensure that they are prepared, according to generally accepted the accounting principle and verifies that the information report is is reliable, is the ________.
A) NYSE Enforcement board
B) Accounting standard board
C) securities, and exchange commission ( SEC)
D) auditor

A

D

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11
Q

The balance sheet shows that asset, liabilities and stakeholders equity of a firm over a given length of time

A

False

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12
Q

Stockholder equities is the difference between a firms, asset and liabilities as shown in the balance sheet

A

True

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13
Q

Which of the following amount would be included on the right side of a balance sheet?
A) the value of government bond held by the company
B) the cash held by the company
C) the amount of deferred tax liability held by the company
D) the amount of money out to the company by customers who haven’t yet paid for goods and services that have received

A

C

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14
Q

Which of the following best describes why the left and right sides of balance sheet are equal?
A) and appropriately run business. The value of liabilities will not exceed assets help by the company.
B) by definition the assets, plus the liability will be the same as the stockholder equity
C) must equal liability plus stockholder equity, and the difference between the asset and the liability
D) by Accounting convention the asset must be equal to company, must be equal to the ability of the company

A

C

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15
Q

A company that produced drugs in preparing balance sheet, which of the following would be most likely to be considered a long-term asset on the balance sheet?
A) commercial paper held by the company
B) the inventory of chemical used to produce the drugs made by the company
C) a patent for a drug held by the company
D) the cash reserve of the company

A

C

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16
Q

A delivery companies, creating a balance sheet, which of the following would most likely be considered a short term liability on this balance sheet?
A) the depreciation over the last year, in the value of the vehicles, owned by the company
B) revenue received for the delivery Of items that haven’t yet been delivered
C) a loan which must paid back in two years
D) prepaid rent on the offices occupied by the company

A

B

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17
Q

A small company has current assets of $112,000 and current liabilities of $117,000. which of the following statements about that company is most likely to be true?
A) Since net working capital is negative, the company will not have enough funds to meet its obligations.
B) Since net working capital is high, the company will likely have little difficulty meeting its obligation.
C) Since net working capital is is very high, the company will have ample money to invest after it meets its obligations
D) Since net working capital is nearly zero, the company is well run and will have little difficulty attracting investors

A

A

18
Q

What is the main problem is using a balance sheet to provide an accurate assessment of the value of a company’s equity?
A) Valuable assets such as the company’s reputation, the quality of its work force, and the strength of its management are not captured on the balance sheet
B) The balance sheet doesn’t accurately represent the book value of assets held by the company
C) The equity shown on the balance sheet doesn’t reflect the market capitalization of the company
D) Knowing at a single point in time what assets a firm possesses and the liabilities a firm owes doesn’t give any indication of what those assets can produce in the future

A

A

19
Q

The major components of stockholders equity are ________.
A) Cash, common stock, and paid-in surplus
B) Common stock, paid-in surplus, and net income
C) Common stock, pain-in surplus, and retained earning
D) Common stock, liabilities, and retained earning

A

C

20
Q

Which of the following balance sheet equations is INCORRECT?
A) Assets - Liabilities = Shareholders’ equity
B) Assets = Liabilities + shareholders’ equity
C) Assets - current liabilities = Long-term liabilities
D)Assets - current liabilities = Long-term liabilities + Shareholders’ equity

A

C

21
Q

Cash is a _________.
A) long-term asset
B) current asset
C) current liability
D) Long term liability

A

B

22
Q

Account payable is a ________.
A) long term liability
B) current asset
C) long term asset
D) current liability

A

D

23
Q

A 30-year mortgage loan is ________.
A) long term liability
B) current liability
C) current asset
D) long term asset

A

A

24
Q

Which of the following statements regarding the balance sheer is INCORRECT?
A) The balance sheet provides a snapshot of a firm’s financial position at a given point in time
B) The balance sheet lists a firm’s assets and liabilities
C) The balance sheet reports stockholders’ equity on the right-hand side
D) The balance sheet reports liabilities on the left-hand side.

A

D

25
Q

The income statement reports the firm’s revenues and expenses, and it computes the firm’s bottom line of net income, or earning

A

TRUE

26
Q

What is a firm’s net income?
A) the difference between the sales and other income generated by a firm., and all costs, taxes, and expenses incurred by the firm in a given period
B) the last or “bottom” line of the income statement
C) a measure of the firm’s profitability over a given period
D) all of the above

A

D

27
Q

What is a firm’s gross profit?
A) the difference between the sales and other income generated by the firm, and all costs, taxes, and expenses incurred by a firm in a given period
B) the difference between sales revenues and the costs
C) the difference between sales revenues and cash expenditures associated with those sales
D) all the above

A

B

28
Q

Which of the following is NOT considered to be an operating expense on the income statement ?
A) administrative expenses and overhead
B) corporate taxes
C) salaries
D) depreciation and amortization

A

B

29
Q

Gross profit is calculated as _____________.
A) total sales - cost of sales - selling, general, and administrative expenses - depreciation and amortization
B) total sales - cost of sales - selling, general, and administrative expenses
C) total sales - cost of sales
D) none of the above

A

C

30
Q

Which of the following is NOT an operating expense?
A) interest expense
B) depreciation and amortization
C) selling, general, and administrative expenses
D) research snd development

A

A

31
Q

The management of public companies is not legally required to disclose any off-balance sheet transactions

A

FALSE

32
Q

A firm whose primary business is in a line of regional grocery stores would be most likely to have to include which of the following facts, if true, in the firm’s management discussion and analysis (MD&A)?
A) that a large number of funds were allocated to advertising to increase awareness of the firm’s brand in new ares it had expanded into this year
B) the some senior members of the management team have retired in this financial year
C) that the company has lost a class action suit brought against the firm by its employees and is expected to have to pay a large amount of damages
D) that the firm has plans to expand into the organic food business in the next financial year by purchasing several small organic food retailers

A

C

33
Q

The notes to the financial statements would LEAST likely be use for which of the following purposes?
A) to provide information regarding the context in which these financial numbers were generated
B) to disclose the financial implications of any off-balance sheet transactions
C) to show how the value of assets listed in the financial statements were arrived at
D) to explain the method of accounting that was used in the preparation of the financial statements

A

B

34
Q

In general, a successful firm will have a market-to-book ratio that is substantially greater than 1.

A

TRue

35
Q

A public company has a book value of $128 million. They have 20 million shares outstanding, with a market price of $4 per share. Which of the following statements is true regarding this company?
A) Investors may consider this firm to be a growth company.
B) Investors believe the company’s assets are not likely to be profitable since its market value is worth less than its book value
C) The firm’s market value is more than its book value
D) The value of the firm’s assets is greater than their liquidation value.

A

B

36
Q

Which ratio would you use to measure the financial health of a firm by assessing that firm’s leverage?
A) debt-equity or equity multiplier ratio
B) market-to-book ratio
C) market debt-equity ratio
D) current or quick ratio

A

A

37
Q

Use of Generally Accepted Accounting Principles (GAAP) and auditors have eliminated the danger of inadvertent or deliberate fraud in financial statements

A

FALSE

38
Q

One way Enron manipulated its financial statement was to sell assets and inflated prices to other firms, while giving a promise to buy back those assets at later date. The incoming cash was recorded as revenue, but the promise to buy back the asset was not disclosed. Which of the following is one of the ways that a transaction is deceptive?
A) the acid should have been listed on the balance sheet as long term assets
B) cash, raised by selling assets, shouldn’t be recorded as a revenue
C) the Off balance sheet promises to purchase assets should have been disclosed in management, discussion and analysis (MD&A) or notes to the financial statement
D) Both B and C are deceptive

A

D

39
Q

WorldCom classified $3.85 billion in operating expenses as long term investments. How would this make WorldCom’s financial statements more attractive to investors?
A) by decreasing depreciation
B) by reducing capital expenditure
C) by raising its report earnings
D) by boosting its cash flows

A

C

40
Q

Which of the following is not one of the ways that the Sarbanes-Oxley Act sought to improve the accuracy of information given to both board and shareholders?
A) by increasing the penalties to firms for providing false information
B) by increasing the independence of auditors and client
C) by decreasing the non-audit fees that an auditor can receive from a client

D) forcing companies to audit financial statement they have release

A

D

FIN 210 (4 decks)

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