test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
Financial Accounting MBAs 8th Edition Easton Comprehensive Test
Bank
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test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
MODULE 1
Financial Accounting for MBAs
Learning Objectives – Coverage by question
True/False Multiple Choice
LO1 – Explain and assess the four main business
activities.
LO2 – Identify and discuss the users and suppliers of
financial statement information. 1- 4 1, 2
LO3 – Describe and examine the four financial
statements, and define the accounting equation. 5-10 3-19
LO4 – Explain and apply the basics of profitability
analysis. 11-13 20-25
LO5 – Assess business operations within the context
of a competitive environment. 14 26, 27
LO6 – Access reports filed with the SEC (Appendix
1A).
LO7 – Describe the accounting principles and
regulations that frame financial statements (Appendix 15 28-30
1B).
These questions are available to assign in myBusinessCourse.
Page 2 of 202 Page
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton.docx
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test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
Module 1: Financial Accounting for MBAs
True/False
Topic: Users of Financial Statement Information LO: 2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers demand information primarily to assess
cash flows to repay loan interest and principal.
Answer: True
Rationale: While both shareholders and bankers are interested in all the information companies provide, shareholders care about more about
a company’s profitability and bankers care more about solvency and creditworthiness.
Topic: Publicly Available Financial Reports LO: 2
2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
Answer: False
Rationale: Companies provide electronic versions of quarterly financial statements to the SEC, which posts them to the Internet for the public to
access them.
Topic: Users of Financial Statement Information LO: 2
3. Publicly traded companies provide financial information primarily to satisfy the SEC and the tax authorities (that is, the Internal Revenue Service).
Answer: False
Rationale: Demand for information extends to many users; the regulators such as the SEC and the IRS are only one class of users.
Topic: SEC Filings LO: 2
4. Publicly traded companies must provide to the Securities Exchange Commission annual audited financial statements (10-K reports) and quarterly
audited financial statements (10-Q reports).
Answer: False
Rationale: Quarterly reports do not need to be audited.
Topic: Balance Sheet LO: 3
5. If a company reports retained earnings of $175.3 million on its balance sheet, it must also report $175.3 million in cash.
Answer: False
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test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
Rationale: The accounting equation requires total assets to equal total liabilities plus stockholders’ equity. That does not imply, however, that
liability and equity accounts relate directly to specific assets.
Topic: Balance Sheet LO: 3
6. A balance sheet shows a company’s position over a period of time, whereas an income statement, statement of stockholders’ equity, and
statement of cash flows show its position at a point in time.
Answer: False
Rationale: The statement is reversed: A balance sheet shows a company’s position at a point in time, whereas an income statement, statement of
equity, and statement of cash flows show its position over a period of time.
Topic: Accounting Equation LO: 3
7. Assets must always equal liabilities plus equity.
Answer: True
Rationale: The accounting equation is Assets = Liabilities + Equity. This relation must always hold.
Topic: Income Statement LO:
3
8. The income statement reports net income which is defined as the company’s profit after all expenses and dividends have been paid.
Answer: False
Rationale: The statement contains two errors. First, net income does not include any dividends during the period; these are a distribution of
profits and not part of its calculation. Second, the income statement is prepared on an accrual basis and thus includes expenses incurred (as
opposed to paid).
Topic: Statement of Cash Flows LO:
3
9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a point in time.
Answer: False
Rationale: A statement of cash flows reports on cash flows for operating, investing, and financing activities over a period of time.
Topic: Statement of Stockholders’ Equity LO: 3
10. An increase in common stock would be reflected in the statement of stockholders’ equity.
Answer: True
Rationale: The statement of stockholders’ equity reports on changes in the accounts that make up stockholders’ equity. This includes contributed
capital, retained earnings, and other equity.
Return on Assets
4
Page 4 of 202 Page
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton.docx
4
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
Financial Accounting MBAs 8th Edition Easton Comprehensive Test
Bank
Page 1 of 202 Page
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton.docx
1
,test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
MODULE 1
Financial Accounting for MBAs
Learning Objectives – Coverage by question
True/False Multiple Choice
LO1 – Explain and assess the four main business
activities.
LO2 – Identify and discuss the users and suppliers of
financial statement information. 1- 4 1, 2
LO3 – Describe and examine the four financial
statements, and define the accounting equation. 5-10 3-19
LO4 – Explain and apply the basics of profitability
analysis. 11-13 20-25
LO5 – Assess business operations within the context
of a competitive environment. 14 26, 27
LO6 – Access reports filed with the SEC (Appendix
1A).
LO7 – Describe the accounting principles and
regulations that frame financial statements (Appendix 15 28-30
1B).
These questions are available to assign in myBusinessCourse.
Page 2 of 202 Page
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton.docx
2
,test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
Module 1: Financial Accounting for MBAs
True/False
Topic: Users of Financial Statement Information LO: 2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers demand information primarily to assess
cash flows to repay loan interest and principal.
Answer: True
Rationale: While both shareholders and bankers are interested in all the information companies provide, shareholders care about more about
a company’s profitability and bankers care more about solvency and creditworthiness.
Topic: Publicly Available Financial Reports LO: 2
2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
Answer: False
Rationale: Companies provide electronic versions of quarterly financial statements to the SEC, which posts them to the Internet for the public to
access them.
Topic: Users of Financial Statement Information LO: 2
3. Publicly traded companies provide financial information primarily to satisfy the SEC and the tax authorities (that is, the Internal Revenue Service).
Answer: False
Rationale: Demand for information extends to many users; the regulators such as the SEC and the IRS are only one class of users.
Topic: SEC Filings LO: 2
4. Publicly traded companies must provide to the Securities Exchange Commission annual audited financial statements (10-K reports) and quarterly
audited financial statements (10-Q reports).
Answer: False
Rationale: Quarterly reports do not need to be audited.
Topic: Balance Sheet LO: 3
5. If a company reports retained earnings of $175.3 million on its balance sheet, it must also report $175.3 million in cash.
Answer: False
Page 3 of 202 Page
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton.docx
3
, test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton
test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton 2026-03-10
Rationale: The accounting equation requires total assets to equal total liabilities plus stockholders’ equity. That does not imply, however, that
liability and equity accounts relate directly to specific assets.
Topic: Balance Sheet LO: 3
6. A balance sheet shows a company’s position over a period of time, whereas an income statement, statement of stockholders’ equity, and
statement of cash flows show its position at a point in time.
Answer: False
Rationale: The statement is reversed: A balance sheet shows a company’s position at a point in time, whereas an income statement, statement of
equity, and statement of cash flows show its position over a period of time.
Topic: Accounting Equation LO: 3
7. Assets must always equal liabilities plus equity.
Answer: True
Rationale: The accounting equation is Assets = Liabilities + Equity. This relation must always hold.
Topic: Income Statement LO:
3
8. The income statement reports net income which is defined as the company’s profit after all expenses and dividends have been paid.
Answer: False
Rationale: The statement contains two errors. First, net income does not include any dividends during the period; these are a distribution of
profits and not part of its calculation. Second, the income statement is prepared on an accrual basis and thus includes expenses incurred (as
opposed to paid).
Topic: Statement of Cash Flows LO:
3
9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a point in time.
Answer: False
Rationale: A statement of cash flows reports on cash flows for operating, investing, and financing activities over a period of time.
Topic: Statement of Stockholders’ Equity LO: 3
10. An increase in common stock would be reflected in the statement of stockholders’ equity.
Answer: True
Rationale: The statement of stockholders’ equity reports on changes in the accounts that make up stockholders’ equity. This includes contributed
capital, retained earnings, and other equity.
Return on Assets
4
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test_bank_for_financial_accounting_for_mbas_8th_edition_by_easton.docx
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