Financial Reporting Test
How
are the income statement and balance sheet linked?
a. Cash
from the balance sheet transfers to the income statement
b. They
are not linked directly
c. All
debt payments show on both the income statement and balance sheet
d. Net
income from the income statement transfers to the balance sheet equity section
How
do investors turn the information on the financial statements into more useful
data which is comparable to other companies?
a. Read
all of the notes
b. Skip
to the net income number, the only important number
c. Track
cash balance
d. Perform
financial analysis
Why
is the Statement of RE created?
a. To
show the changes in Retained Earnings over a period of time
b. To
show how the Retained Earnings balance at a specific time
c. To
give the reader an idea of how much cash is reinvested in the company
d. It
is a placeholder for tax liability
Why
would a company repurchase their own stock?
a. It
is required to by the law after 1 year
b. To
dilute the outstanding shares
c. To
put cash in the stockholder's hands without issuing a dividend
d. To
boost the share price
How
would the financial statements be useful for a Company Manager?
a. To
decide whether to buy more stock or sell off the stock they own before
financial reports become public
b. To
compete against other departments for best sales
c. To
make operational decisions based on comparing past and current results
d. To
decide whether to double fixed assets in the next period
A
company declares a dividend. What is its effect on the cash?
a. It
increases Cash
b. It
decreases Cash
c. There
is no change
d. It
depends on the dividend date
Which
of the following does Financing Activities not include?
a. Payments
to vendors
b. Payments
of dividends to company shareholders
c. Payments
to repurchase company shares
d. Repayment
of debt
What
number is transferred from the Income Statement to the Cash Flow statement?
a. Gross
Sales
b. Net
Income
c. Payroll
Expense
d. Taxes
Which
of the following would not be included in a balance sheet?
a. Accounts
receivable
b. Accounts
payable
c. Sales
d. Cash
Which
of these does the operating section of a cash flow statement not contain?
a. Interest
received on loans
b. Payments
to suppliers
c. Dividends
received from investments
d. Purchase
of fixed assets
What
does Treasury Stock appear on the balance sheet as?
a. As
a reduction of opening Retained Earnings
b. As a
positive entry in the equity section
c. As
Dividends Paid
d. As a
negative entry in the equity section
The
best financial report to see a company's cash balance is ______.
a. Balance
Sheet
b. Income
Statement
c. Margin
Analysis
Which method of preparing the statement of
cash flows begins with Net Income?
a. Direct
b. Indirect
c. Current
Period
d. Accrual
What
is Treasury Stock?
a. Stock
purchased by the U.S. Treasury Department
b. Stock
repurchased by the issuing company, reducing the amount of stock outstanding in
the open market
c. Stock
purchased by the treasurer of the company for their personal portfolio
d. Stock
not allowed to be purchased in the first 30 days after IPO
What
is another name for the Balance Sheet?
a. Income
Statement
b. Statement
of Income
c. Cash
Inflows & Outflows
d. Statement
of Financial Position
Why
is depreciation added back in the cash flow statement?
a. It
is a substantial number which could skew the report if ignored
b. Companies
handle depreciation differently so it is added back to neutralize any effects
c. It
is non taxable
d. It
is a transaction which will never impact cash and needs to be reversed out from
its effect on net income
What
is the one problem while comparing financial statements with companies based in
different countries?
a. Countries
use different accounting standards, comparisons can only be made directly with
countries using GAAP
b. The
exchange rate needs to be applied
c. Other
countries do not audit their financial statements as thoroughly
d. Product
lines are completely different making a comparison unusable
Why
would someone be interested in how the company used its cash?
a. Cash
flow indicates profitability
b. Cash
flow indicates how the company is managing its cash resources
c. The
current cash flow statement indicates future profitability
d. It
is a good detection method for fraud
Which
of the following is a difference between a public company and a private one?
a. Public
companies use different accounting software than private ones
b. Public
companies will always have more employees than a private one
c. Only
public companies can form corporations
d. Public
companies must have audited financial statements and prepared SEC reports
Which
of the following is not a fundamental of accounting?
a. Materiality
b. Timeliness
c. Matching
d. Magnitude
Which
of the following is not a part of cost of goods sold?
a. Raw
material
b. Labor
c. Capital
d. All
of the above are part of cost of goods sold
Why
would a company repurchase their own stock?
a. To
reduce the market float at a time when the stock is undervalued in the market
b. To
reduce the market float when prices are high
c. To
increase the market float at a discount
d. To
increase the market float at a premium, sending stocks higher
Which
of these are the four general groups of outside users of a company's financial
reports?
a. Government,
Charities, SEC, IRS
b. Investors,
Lenders, Government, General Public
c. Accounting
Standards Board, Charities, GAAP, Employees
d. Unions,
Non Unions, Government Officials, SEC
A
company pays out a previous declared common stock dividend. What is its effect
on the cash?
a. It
will decrease
b. It
will increase
c. There
would be no change
d. It
depends on the dividend date
How
often do companies typically generate standard financial reports?
a. Yearly
b. Quarterly
c. Monthly
d. Daily
What
is another name for the Income Statement?
a. Income
Statement
b. Profit
& Loss Statement
c. Statement
of Cash Flows
d. Statement
of Financial Position
The
three sections of a Statement of Cash Flows are _____.
a. Leverage,
liquidity, financing
b. Operating,
investing, profit
c. Operating,
investing, financing
d. Sales,
investing, financing
e. Operating,
investing, borrowing
What
is one possible use employees would have of the company financial statements?
a. It
helps the unionized workers to determine their collective bargaining agreements
b. It
helps the employees to buy shares of the company before a big news release hits
c. It
helps the employees to demonstrate their own personal contribution to the
company
d. It
helps in creating human resource policies
By
doing/issuing which of the following could a company raise short-term funds by
selling receivables and inventory?
a. By
factoring
b. By
pledging inventory
c. By
line of credit
d. By
Notes
e. By
term loan
Which
of these items would be accounted for as an expense?
a. Repayment
of a bank loan
b. Dividends
to stockholders
c. Purchase
of land
d. Payment
of the current period's rent
Which
of the following errors/s can a trial balance be used to detect?
a. A
calculation error resulting in sales tax being entered twice
b. The
omission of depreciation on a new asset purchase
c. A
transposition error when entering the credit side of an entry
d. A
missing payroll entry
What
does GAAP stand for?
a. General
Accounting Accrual Procedures
b. Generally
Accepted Accounting Principles
c. Gap
Accounts receivable Accounting Practices
d. General
Accounting Accounts Payable
How
does the income statement of a charity differ from that of a public company?
a. Charities
typically have higher overhead expenses such as management wages
b. Charities
produce a similar report which shows funding sources, and program expenses and
other commitments
c. Charities
do not generate cash via a revenue model, and do not produce any statements
d. Charities
report each donation as taxable income
A
company prepays for 6 months of insurance. What effect does this have on their
current assets?
a. No
Change
b. Increase
c. Decrease
d. Varies
depending on how they paid
What
is the purpose of the statement of cash flows?
a. To
demonstrate how the company used their cash in the period reported
b. To
show net income
c. To
show how much cash the company collected in the period reported
d. To
show outstanding loans and loan payments made
What
is the purpose of an income statement?
a. To
show the reader how the company made and spent money in the period presented
b. To
examine income tax liability
c. To
show how much cash was generated in the period presented
d. To
determine management bonuses at year end
How
are the Statement of Retained Earnings & the Balance Sheet related?
a. Debts
paid off in the current period are detailed in the Statement of RE
b. Statement
of RE is a detailed analysis of the equity section and the change in it from
the prior reported period
c. Cash
from the balance sheet is transferred to the Statement of RE
d. They
are not linked directly
When
a company files a statement of their financial plans for the next two years
with the SEC, it is called a ______.
a. Market
plan
b. Shelf
registration
c. Stock
plan
d. Statement
of intent
e. Prospectus
What
are the four traits of a useful financial statement?
a. Material,
Timely, Accurate, Cash Basis
b. Bi
Weekly, Audited, Outsourced, Comparable
c. Relevant,
Accurate, Cash Basis, Bi Weekly
d. Understandable,
Relevant, Reliable, Comparable
How
does Gross Income differ from Net Income?
a. Gross
Income determines the company's cash flow, Net Income does not
b. Gross
Income includes several fixed costs, Net Income does not
c. Gross
Income includes all fixed costs, Net Income does not include any
d. Gross
Income measures profitability before operating expenses, whereas Net Income is
calculated after all operating expenses