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Exam 17: Understanding Accounting and Financial Information

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Question 41

Multiple Choice

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Leverage ratios indicate the extent to which ________ has been used to fund a business's operations.

A) debt
B) equity
C) owner invested capital
D) profit

E) All of the above
F) B) and C)

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Question 42

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The current ratio is found by dividing the firm's total assets by its total liabilities.

A) True
B) False

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Question 43

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

A lower than average inventory turnover ratio indicates excellent inventory management practices.

Identify and explain the differences between LIFO and FIFO inventory valuation methods.What would be the difference in gross margin using FIFO versus LIFO?

The sixth and final step in the accounting cycle involves:

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

Retailers attempt to sell older merchandise before more recently acquired merchandise is sold.The assumptions made by the __________ method of inventory valuation are most consistent with this approach.

Revenue on the income statement represents the dollar amount of what is received for goods sold,services rendered and/or from other revenue sources.

As a first step in the accounting cycle,_________ involves the recording of business transactions.

Preferred Pet Care,Inc.a mobile veterinary care clinic has more appointments than it ever expected to have when it opened its doors.Each week it orders more vaccines,antibiotics,and preventive care supplies from a major veterinary supplier,with the understanding that it will pay for these supplies in one month's time.Most of the company's clients are elderly and on fixed incomes,and often do not pay for services for two or more months.This is not a problem because as long as the company continues to increase its appointments,it will create profits and growth.

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

The best way for a firm to avoid serious cash flow problems is to sustain a rapid growth in sales.

Cash flow difficulties are unlikely for a firm that is profitable.

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

Both the current ratio and the acid-test ratio are liquidity ratios.

Accounting transactions are very important to a firm's operations.Which of the following activities would affect the firm's account balances?

Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision-making.

Many business decisions are made in hopes of improving a firm's "bottom line." Which of the following financial statements will reveal a firm's "bottom line"?

A __________ is a specialized accounting book,where transactions are categorized according to type.For example,all utility transactions are recorded in the same category.