IVY SOFTWARE MBA PREPWORKS
MANAGERIAL ACCOUNTING PRACTICE PAPER
2026 COMPLETE SOLUTIONS
◉ Economic Entity. Answer: one firm, one set of books
◉ Which of the following is an operating performance ratio?
Debt to total assets
Times interest earned
Payout ratio
Times interest earned and payout ratio
None. Answer: Times interest earned and Payout Ratio
◉ Going Concern. Answer: a firm has value beyond the liquidation
value of its assets
◉ Horizontal analysis compares the components of a balance sheet
with a base item. T/F. Answer: False
◉ Monetary Unit. Answer: financial transactions are denominated in
a stable unit of measure
,◉ Since companies have different numbers of shares outstanding, it
is not useful to compare earnings per share ratios. T/F. Answer: True
◉ Accounting Periods. Answer: the result of operations for an entity
must be reported on a periodic basis, usually a year
◉ There are two ratios that help define the operating cycle. They
are:
receivables and inventory turnover
receivables and accounts payable
inventory and accounts payable turnover
none of these. Answer: Receivables and accounts payable
◉ Revenue/Epense matching. Answer: accounting entities should
aspire to recognize expenses in the same accounting periods as the
revenues they generate
,◉ The ratio that shows the markup in price over the cost of goods
sold is
profit margins
gross margin ratio
return on assets
asset turnover
none. Answer: Gross margin ratio
◉ Conservatism. Answer: given an uncertain and imprecise
environment, it is better to understate than overstate economic
well-being
◉ The ratio that shows how investors value the stock is
payout ratio
earnings per share
return on equity
return on assets
none. Answer: None
, ◉ Understandability. Answer: Financial conditions and results
should be communicated so that they are understandable by an
educated user of financial information
◉ Relevance. Answer: Financial data must also be relevant to a user
to be of value, extraneous information need not appear
◉ Financial strength ratios are utilized to help predict the long-run
solvency of a company. T/F. Answer: True
◉ Ratio analysis is popular because ratios:
summarize important info
are useful in comparisons within a company over time
are useful in comparisons with other companies
all the above. Answer: All the above
◉ Consistency. Answer: accounting entities must consistently apply
the elections available to them so that results from different periods
can be compared
MANAGERIAL ACCOUNTING PRACTICE PAPER
2026 COMPLETE SOLUTIONS
◉ Economic Entity. Answer: one firm, one set of books
◉ Which of the following is an operating performance ratio?
Debt to total assets
Times interest earned
Payout ratio
Times interest earned and payout ratio
None. Answer: Times interest earned and Payout Ratio
◉ Going Concern. Answer: a firm has value beyond the liquidation
value of its assets
◉ Horizontal analysis compares the components of a balance sheet
with a base item. T/F. Answer: False
◉ Monetary Unit. Answer: financial transactions are denominated in
a stable unit of measure
,◉ Since companies have different numbers of shares outstanding, it
is not useful to compare earnings per share ratios. T/F. Answer: True
◉ Accounting Periods. Answer: the result of operations for an entity
must be reported on a periodic basis, usually a year
◉ There are two ratios that help define the operating cycle. They
are:
receivables and inventory turnover
receivables and accounts payable
inventory and accounts payable turnover
none of these. Answer: Receivables and accounts payable
◉ Revenue/Epense matching. Answer: accounting entities should
aspire to recognize expenses in the same accounting periods as the
revenues they generate
,◉ The ratio that shows the markup in price over the cost of goods
sold is
profit margins
gross margin ratio
return on assets
asset turnover
none. Answer: Gross margin ratio
◉ Conservatism. Answer: given an uncertain and imprecise
environment, it is better to understate than overstate economic
well-being
◉ The ratio that shows how investors value the stock is
payout ratio
earnings per share
return on equity
return on assets
none. Answer: None
, ◉ Understandability. Answer: Financial conditions and results
should be communicated so that they are understandable by an
educated user of financial information
◉ Relevance. Answer: Financial data must also be relevant to a user
to be of value, extraneous information need not appear
◉ Financial strength ratios are utilized to help predict the long-run
solvency of a company. T/F. Answer: True
◉ Ratio analysis is popular because ratios:
summarize important info
are useful in comparisons within a company over time
are useful in comparisons with other companies
all the above. Answer: All the above
◉ Consistency. Answer: accounting entities must consistently apply
the elections available to them so that results from different periods
can be compared
