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Exam 17: Understanding Accounting and Financial Information

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Question 131

Multiple Choice

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Peak Performance Sporting Goods Company competes with several other firms in the retail industry for important visibility and retail space in large stores.The company's chief financial officer knows that in order to attract investors,the company must demonstrate growth,and its management must outperform the competition.The CFO continuously watches __________________ because these are key to measuring growth.

A) activity ratios
B) profitability ratios
C) leverage ratios
D) liquidity ratios

E) None of the above
F) C) and D)

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Question 132

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For firms that sometimes have difficulty selling their inventory,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 133

Multiple Choice

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The accounting book or computer program where each day's transactions are first recorded is called a:

Patents and copyrights are examples of intangible assets.

An individual who provides accounting services to individuals and businesses on a fee basis is referred to as a private accountant.

The balance sheet is composed of the following types of accounts:

A bookkeeper's first task is to record the firm's transactions in a journal.

A firm's balance sheet reports its financial condition on a specific date.

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

There are five key working areas in accounting: financial accounting,managerial accounting,auditing,tax accounting,and government and not-for-profit accounting.

Assets are reported on the firm's balance sheet.

Information contained in a firm's annual report largely represents work done by managerial accountants.

A person's pulse rate and blood pressure are indicators of a person's health.Similarly,_________ can help assess the health of a business.

The Barkley Company wants to know the value of its owners' equity.It will total its assets and subtract its liabilities.

In the Making Ethical Decisions box titled,"Barking-Up the Wrong Financial Statement," the situation provides the student with an ethical dilemma that might present itself to an accounting professional.The story focuses on: Is it ethical to __________________________

The acid-test ratio is found by dividing inventory by cost of goods sold.

During a period of rising prices,the FIFO technique of inventory valuation will result in a lower net income figure than would the LIFO technique.

Green Living Construction Company installs solar panels in large newly constructed buildings.The company employs several expert installers who work on a full-time basis.Although the installers work everyday,the company pays them at the end of the month,for the previous month's work.Employee salaries are recorded as ___________ on Green Living's Balance Sheet.

The U.S.government is a user of a firm's accounting information.

__________ involves the review and evaluation of the records that are used to prepare the organization's financial statements.