accounting

After one year, an investment earning 2% interest would grow to 1.02 times it's initial value.

True

False

Liabilities are not the claims of creditors to a company's resources.

True

False

Which of the following is a source of cash?

A) Increase in accounts receivable.

B) Gain on sale of a piece of equipment.

C) a decrease in inventories.

D) a decrease in long-term debt.

A well-presented statement of cash flows can provide all of the information found in a balance sheet and income statement.

True

False

Two major elements of return on assets (ROA) are profit margin and asset turnover. An analysis of these two component parts can provide valuable insights into a firm's performance.

True

False

Ratio analysis is one of the methods used in financial statement analysis.

True

False

Liabilities normally have a left-hand balance.

True

False

If a bank were to impose a working capital covenant in a loan agreement to you, what strategy below would help you to keep net working capital above mandated minimum?

A) Selling excess inventory (below cost) for cash.

B) Converting accounts payable to a long-term note payable.

C) Issuing short-term debt for cash.

D) Buying raw materials and agreeing to pay the invoice in 30 days.

Credits are generally good and debits are generally bad.

True

False

Dividends are distributions of profits to the owners of a corporation, but do not represent an expense to the firm.

True

False

Analysts often take a short cut in estimating a firm's cash from operations: they just add depreciation back to net income. What is the greatest shortcoming of this approach?

A) Depreciation is not relevant to a cash flow analysis.

B) Expenditures for PP&E are not considered in the cash flow from operations.

C) Changes in working capital elements are disregarded in this approach.

D) Companies do not report their depreciation expenses.

Ratio analysis is unqualifiably the best method of financial statement analysis.

True

False

The income statement shows the revenues, expenses and net income of an enterprise over a period of time.

True

False

The statement of cash flows as presented under FASB Statement No. 95 is the only measure of a company's cash flow.

True

False

Horizontal and vertical analysis are two key techniques used in analyzing financial statements, usually applied in tandem. Briefly stated, vertical analysis requires that a significant element be measured as a percentage of a base to which it is related. For example, the various components of an income statement might be measured as a percentage of sales. This technique can be applied to the balance sheet as well.

True

False

The inventory turnover ratio is one indicator of a firm's operation efficiency. Typically, faster turns means that management is doing a better job of buying or controlling inventory.

True

False

The statement of retained earnings shows the revenues, expenses and net income of an enterprise over a period of time.

True

False

The accounting process is concerned only with external transactions representing economic events.

True

False

Financial accounting, like managerial accounting, has no firm guidelines that it must follow.

True

False---prepared for external users

The collection of an account receivable generates cash, but this does not imply an increase in assets.

True

False

The accounting process is concerned with internal and external transactions representing economic events.

True

False

Revenue and expense accounts are real accounts.

True

False

Profit margin provides the user with a comprehensive profit picture of a firm.

True

False

Liabilities are the claims of creditors to a company's resources.

True

False

Debits always increase an account, while credits decrease an account.

True

False

A well-presented statement of cash flows cannot provide all of the information found in a balance sheet and income statement.

True

False

Current ratios and quick ratios usually provide a clear picture of the financial leverage employed by a firm.

True

False

Discounting is compounding in reverse.

True

False

If a company's retained earnings account has a credit (right-hand) balance, then the firm must have generated a profit during the period.

True

False

A transaction is an event that affects the financial position of a company.

True

False

Current Assets almost always equal Current Liabilities.

True

False

Which of the following would appear in the operating activities sections of a statement of cash flows prepared using the direct method, but not in one prepared using the indirect method.

A) Change in accounts receivable

B) Depreciation Expense

C) Cash paid to employees

D) Change in accounts payable

E) Change in retained earnings

Debt-to-Equity and Debt-to Assets ratios usually provide a clear picture of the financial leverage employed by a firm. The higher the level of debt, the higher the implied financial risk. An informed reader, however, understands that it is appropriate to draw this general conclusion only when comparing firms within the same or very similar industries.

True

False

Plymouth State Financial Accounting A Management Perspective Final Exam :: Sadia Chaudhry :: 42716932

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