Reading comprehension 15

Question 1

The purpose of ___________ is to distribute timely and useful information from both internal and external sources to the decision makers who need it.

a. a manager awareness program
b. a management information system
c. entrepreneurial information software
d. a computer information program
e. a desktop information system

Answer 1

b. a management information system

Question 2

The financial statement that provides information about a firm’s operating, investing, and financing activities during an accounting period is the

a. balance sheet.
b. income statement.
c. cash flows statement.
d. retained earnings statement.
e. financial analysis statement.

Answer 2

c. cash flows statement.

Question 3

All of the following are acceptable ways of stating the accounting equation except

a. owners’ equity = assets − liabilities.
b. assets = liabilities + owners’ equity.
c. owners’ equity − liabilities = assets.
d. assets − liabilities = owners’ equity.
e. assets = shareholders’ equity + liabilities.

Answer 3

c. owners’ equity − liabilities = assets.

Question 4

A public corporation must change its lead auditing firm

a. every year.
b. every two years.
c. every five years.
d. every ten years.
e. whenever it wants to.

Answer 4

c. every five years.

Question 5

Revenues − cost of goods sold − expenses = net income characterizes which financial statement?

a. Balance sheet
b. Statement of retained earnings
c. Statement of cash flows
d. Statement of financial position
e. Income statement

Answer 5

e. Income statement

Question 6

A(n)_______ is a summary of a firm’s revenues and expenses during a specified accounting period, such as a year.

a. income statement
b. balance sheet
c. capital statement
d. statement of financial position
e. statement of owners’ equity

Answer 6

a. income statement

Question 7

A prepaid expense would be classified as

a. an expense.
b. an unearned revenue.
c. a liability.
d. an asset.
e. cost of goods sold.

Answer 7

d. an asset.

Question 8

Which of the following statements is true?

a. The more information a manager has, the more risk there is when making a decision.
b. The more information a manager has, the less risk there is when making a decision.
c. Risk improves decision making.
d. Most managers make decisions without any information.
e. When the amount of information is low, there is less risk.

Answer 8

b. The more information a manager has, the less risk there is when making a decision.

Question 9

Commonly used in accounting analysis, a _______ shows a relationship between two elements of a firm’s financial statements.

a. statistic
b. comparative number
c. current ratio
d. financial ratio
e. formula

Answer 9

d. financial ratio

Question 10

An airplane that FedEx owns and uses to deliver packages is a(n) ______of FedEx.

a. liability
b. asset
c. owners’ equity
d. expense
e. revenue

Answer 10

b. asset