Chapter 4

Question 1

Revenue after adjustments

Answer 1

Net revenue

Question 2

The amount of income earned during a period per share of common stock

Answer 2

Earnings per-share

Question 3

The net amount of cash provided from operating activities

Answer 3

Operating cash flow

Question 4

With reference to the presentation of expenses and income statement, the grouping together of expenses by similar nature.

Answer 4

Grouping by nature

Question 5

Sales minus the cost of sales

Answer 5

Gross profit

Question 6

With respect to the format of the income statement, a format that presents a subtotal for gross profit

Answer 6

Multi step format

Question 7

With respect to the format of the income statement, a format that does not subtotal for gross profit

Answer 7

Single step format

Question 8

A company’s profits on its usual business activities before deducting taxes

Answer 8

Operating profit

Question 9

A contract that spans a number of accounting periods

Answer 9

Long term contract

Question 10

A method of revenue recognition in which, in each accounting period, the company estimates what percentage of the contract is complete and then reports the percentage of the total contract revenue in its income.

Answer 10

Percentage of completion

Question 11

A method of revenue recognition in which the company does not recognize any revenue until the contract is completed; used particularly in long term construction contracts.

Answer 11

Completed contracts

Question 12

A method that specifies that the portion of the total profit of the sale that is recognized in each period is determined by the percentage of the total sales price for which the seller has received cash

Answer 12

Installment period

Question 13

Seller does not report any profit until the cash amounts paid by the buyer a greater than all the sellers costs for the merchandise sold

Answer 13

Cost recovery method

Question 14

The last in, first out, method of accounting for inventory.

Answer 14

LIFO method

Question 15

The process of systematically allocating the cost of long-lived assets to the period during which the assets are expected to provide economic benefits

Answer 15

Depreciation

Question 16

The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods

Answer 16

Amortization

Question 17

Equity shares that are subordinate to all other types of equity

Answer 17

Ordinary shares

Question 18

The ratio of gross profit to revenues

Answer 18

Gross profit margin

Question 19

An indicator of profitability calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses

Answer 19

Net profit margin

Question 20

A profitability ratio calculated as operating income divided by revenue

Answer 20

Operating profit margin

Question 21

A type of security that represents an ownership interest in a company

Answer 21

Common shares

Question 22

The first in, first out method of accounting for inventory

Answer 22

FIFO

Question 23

An indicator of profitability, calculated as net income divided by revenue; indicates how much of each dollar of revenue is left after all costs and expenses

Answer 23

Return on sales

Question 24

Assets that are expected to provide economic benefits over a future period of time, typically greater than one year

Answer 24

Long-lived assets

Question 25

A depreciation method that allocates evenly the cost of a long lived asset less its estimated residual value over the estimated useful life of the asset

Answer 25

Straight line method

Question 26

The EPS that would result if all dilutive securities were converted into common shares

Answer 26

Diluted EPS

Question 27

Net earnings available to come shareholders divided by the weighted average number of common shares outstanding

Answer 27

Basic EPS

Question 28

Securities held for company with the intent to trade them

Answer 28

Traded securities

Question 29

The financial statement that presents an entities current financial position by disclosing resources the entity controls in the claims of those resources as of a particular point in time

Answer 29

Balance sheet