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Exam 16: Understanding Accounting and Financial Information

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Question 31

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The accounting profession is divided into five key working areas,two of which are:

A) auditing and managerial accounting.
B) forecasting and logistical accounting.
C) inventory control and budgeting.
D) income accounting and expenditure accounting.

E) C) and D)
F) B) and D)

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Question 32

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For firms that sometimes have difficulty selling their inventory of goods,the current ratio is likely to be a better measure of liquidity than the acid-test ratio.

A) True
B) False

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Question 33

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__________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock,stock options,warrants and convertible debt securities are also taken into account.

Computerized accounting programs have eliminated the need to prepare a trial balance.

Liquidity ratios are of particular importance to stockholders,but have little relevance for creditors.

One of the problems with current accounting procedures is that there is no way for firms to systematically write off the costs of property and equipment over time.

What group or groups are interested in a company's financial statements?

Horst works as an accountant for a mid-sized retail store.He has just completed a trial balance that turned up no unexpected problems.Horst's next major task is likely to be:

Financial accounting involves activities such as preparing budgets and measuring production costs.

A firm's ________ reports the profit or loss for the firm over a specified time period.

Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization.

Financial accountants prepare reports for owners,creditors,suppliers,and others outside of the organization.

If a firm can reduce its cost of goods sold and continue to sell its product for the same price,we would expect the firm to enjoy an increase in its ________.

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

_________ involves the recording of business transactions.

The purpose of the current ratio is to evaluate the firm's ability to:

The job of reviewing and evaluating the records used to prepare a company's financial statements is referred to as compliance.

The __________ is a six step procedure that results in the preparation and analysis of the major financial statements.

A firm's annual report is a yearly statement of the financial condition,progress,and expectations of the organization during one year.

Jamal is an accountant employed by Acctex,Inc.Jamal is an example of a public accountant.