Quiz Questions in the lectures

Question 1

Who is responsible for financial statements, planning and tax?

Answer 1

Controller

Question 2

Which of the following is true?

 Annual statements don’t require a Directors reports
 Annual statements don’t require a cash flow statement
 The prudence convention dictates that the most optimistic value should always be used

Answer 2

 Annual statements don’t require a cash flow statement

Question 3

Which two of the following are true?

 Balance sheets take a long-term view of financial performance
 Cash flow can be assessed using balance sheets
 Value can be assed using balance sheets
 Profit can be assessed using profit and loss statements

Answer 3

 Value can be assed using balance sheets

 Profit can be assessed using profit and loss statements

Question 4

Which two of the following are true?

 Long term assets should always balance with short term assets
 Long term assets should always balance with long term liabilities
 Assets should always balance with liabilities
 Double entry accounting is a dishonest practice that involves counting things twice to ‘cook the books’
 Double entry is the mechanism for creating accurate balance sheets

Answer 4

 Assets should always balance with liabilities

 Double entry is the mechanism for creating accurate balance sheets

Question 5

Which two of the following are true?

 A balance sheet should always balance
 A balance sheet should never balance
 A balance sheet can’t always balance
 A balance sheet provides a snap-shot of a companies value but can be manipulated or ‘cooked’
 A balance sheet provides an objective, accurate and reliable assessment of value

Answer 5

 A balance sheet should always balance

 A balance sheet provides a snap-shot of a companies value but can be manipulated or ‘cooked’

Question 6

What would you use to help establish whether a company could meet their liabilities?

Answer 6

The balance sheet

Question 7

Which of the following is true?

 A profit and loss statement provides a comprehensive view of a companies financial health
 A range of different financial statements and some ‘reading between the lines’ is required to establish a sense of a companies financial health
 A comprehensive view of financial health can be obtained by ensuring there is consistency between the various financial reports

Answer 7

 A range of different financial statements and some ‘reading between the lines’ is required to establish a sense of a companies financial health

Question 8

What to shareholder ratios allow for?

Answer 8

Show return on stakeholder equity

Question 9

A business has a ‘acid test’ value of 0.4. Which of the following is correct?

 The business is definitely on the rocks
 The business has loads of cash sitting around that could perhaps be working harder (maybe they are just about to make a big investment).
 The business is appealing to someone looking to get their hands on quick cash
 The business probably has high levels of inventory

Answer 9

 The business probably has high levels of inventory

Question 10

A business has a ‘acid test’ value of 8.2 Which of the two following are correct?

 The business is definitely on the rocks
 The business has loads of cash sitting around that could perhaps be working harder (maybe they are just about to make a big investment).
 The business is appealing to someone looking to get their hands on quick cash
 The business has high levels of inventory

Answer 10

 The business has loads of cash sitting around that could perhaps be working harder (maybe they are just about to make a big investment).
 The business is appealing to someone looking to get their hands on quick cash

Question 11

If you were using ‘acid test’ to assess how productive a company is and they have a low value (0.3), which other measure would be appropriate to evaluate performance?

Answer 11

 Inventory turnover ratio because it would indicate how well they were using their stock (a acid test value of 0.3 could suggest high inventory levels).

Question 12

Based on the Transition Systems Architect accounts, which two of the following statements are true?

 There is nothing to be alarmed about, everything looks in order
 It is always a healthy to see that total receivables and revenue are increasing
 As long as either revenue or receivables is increasing, everything is ok
 The increase in unbilled receivables is cause for concern, especially during a period where sales increase.
 The accounts suggest an overly aggressive approach to revenue recognition

Answer 12

 The increase in unbilled receivables is cause for concern, especially during a period where sales increase.
 The accounts suggest an overly aggressive approach to revenue recognition

Question 13

Same Store Sales is an example of a financial metric which falls outside GAAP. Which two of the following are true?

 It can be useful but should be considered with caution and in conjunction with other metrics
 It is the best means of assessing performance of retail and restaurant businesses
 Changes to the definition of SSS are normal and reflect changes in the business environment.
 Changes in the definition of SSS are a cause for concern and require further investigation

Answer 13

 It can be useful but should be considered with caution and in conjunction with other metrics
 Changes in the definition of SSS are a cause for concern and require further investigation