,Name: Class: Date:
Chap 01_10e
Indicate the answer choice that best completes the statement or answers the question.
1. Which forces typically represent vertical competition in a value chain?
a. Potential entry and substitutes.
b. Buyer power and rivalry among existing firms
c. Supplier power and potential entry.
d. Buyer power and supplier power
2. Cash and cash equivalents are considered ______ assets. Select the best term to complete the sentence.
a. Intangible
b. Monetary
3. On the statement of cash flows, depreciation would be classified as?
a. A financing activity.
b. An operating activity.
c. An investing activity.
d. A noncash activity.
4. How easily can customers switch to substitute products is a question one might ask when assessing the ______.
a. threat of entrants
b. threat of substitutes
5. The five economic attributes that are normally studied are demand, supply, manufacturing, ______, and investing
and financing. Select the best term to complete the sentence.
a. marketing
b. sustainability
6. The threat of new entrants is measured by whether there are entry barriers, such as capital investment, ______,
patents, or regulation that inhibit new entrants. Select the best term to complete the sentence.
a. labor shortages
b. technological expertise
7. The accrual basis of accounting recognizes:
a. Revenue when cash is received from customers
b. Expenses when paid
c. Revenue when all or a substantial portion is performed
d. Revenue when contracts are signed
8. Extraordinary gains and losses arise from events that have all the following characteristics except:
a. They are unusual given the nature of the firm’s activity.
b. They are nonrecurring.
c. They are material in amount.
d. They result from terminated involvement in a line of business.
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,Name: Class: Date:
Chap 01_10e
9. Which of the following is not considered to be a liability?
a. Wages payable.
b. Accounts payable.
c. Notes payable.
d. Cost of goods sold.
10. The ______ sets forth the sequence of activities involved in the creation, manufacture and distribution of its
products and services. Select the best term to complete the sentence.
a. sales to cash cycle
b. value chain
11. The cash basis method of accounting can be best described as:
a. The recording of transactions and adjustments so that debits equal credits.
b. The method that equates assets with liabilities and owners’ equity.
c. The method that recognizes revenue when money is received and expenses when money is paid.
d. The method that matches incurred expenses with related revenues when they are earned.
12. An example of an intangible asset is:
a. A patent
b. Land
c. Investment in another company
d. Raw material inventory
13. On a common size basis, which of the following assets is normally largest for an electric utility?
a. Accounts receivable
b. Inventory
c. Property, Plant and Equipment
d. Cash and Marketable Securities
14. When assessing buyer power using Porter’s five forces, which of the following is not consistent with low buyer
power?
a. Brand loyalty
b. Control of distribution channel
c. Large number of suppliers
d. Low price
15. All of the following are the building blocks for financial statement analysis except:
a. Targeting growth opportunities that diversify exchange rates, risk exposure, and political uncertainty.
b. Describing strategies that a firm pursues to differentiate itself from competitors in order to evaluate
competitive advantages, sustainability of the firm’s earnings, and its risks.
c. Evaluating the financial statements, including the accounting concepts and methods that underlie them and
the quality of the information they provide
d. Identification of the economic characteristics of the industries and the relation of those economic
characteristics to the various financial statement ratios.
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, Name: Class: Date:
Chap 01_10e
16. Statements that express all items in a particular financial statement as a percentage of some common base are
called ______ statements. Select the best term to complete the sentence.
a. common size
b. income
17. Which of the following is not one of Porter’s five forces?
a. Buyer Power
b. Supplier Power
c. Threat of Regulation
d. Threat of Substitutes
18. Which of the following economic characteristics is consistent with a grocery store chain?
a. Low barriers to entry.
b. High levels of research and development.
c. High profit margins.
d. Low capital intensity.
19. The fourth step in financial statement analysis is using the financial statements to analyze the current profitability,
growth and ______ of the firm. Select the best term to complete the sentence.
a. size
b. risk
20. Which of the following would not appear as a liability on the balance sheet?
a. A labor contract
b. A note due to a bank
c. Salary due employees at year-end
d. Accounts payable
21. Current assets are defined as:
a. Cash and cash equivalents.
b. All assets expected to be quickly used by the firm.
c. Cash and other assets that the firm expects to sell or consume during the normal operating cycle of a
business, usually one year.
d. Cash and other assets that the firm expects maintain for a period including the normal operating cycle of a
business, usually one year.
22. Which of the following is not an activity reported in the Statement of cash Flows?
a. Operating
b. Investing
c. Manufacturing
d. Financing
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Chap 01_10e
Indicate the answer choice that best completes the statement or answers the question.
1. Which forces typically represent vertical competition in a value chain?
a. Potential entry and substitutes.
b. Buyer power and rivalry among existing firms
c. Supplier power and potential entry.
d. Buyer power and supplier power
2. Cash and cash equivalents are considered ______ assets. Select the best term to complete the sentence.
a. Intangible
b. Monetary
3. On the statement of cash flows, depreciation would be classified as?
a. A financing activity.
b. An operating activity.
c. An investing activity.
d. A noncash activity.
4. How easily can customers switch to substitute products is a question one might ask when assessing the ______.
a. threat of entrants
b. threat of substitutes
5. The five economic attributes that are normally studied are demand, supply, manufacturing, ______, and investing
and financing. Select the best term to complete the sentence.
a. marketing
b. sustainability
6. The threat of new entrants is measured by whether there are entry barriers, such as capital investment, ______,
patents, or regulation that inhibit new entrants. Select the best term to complete the sentence.
a. labor shortages
b. technological expertise
7. The accrual basis of accounting recognizes:
a. Revenue when cash is received from customers
b. Expenses when paid
c. Revenue when all or a substantial portion is performed
d. Revenue when contracts are signed
8. Extraordinary gains and losses arise from events that have all the following characteristics except:
a. They are unusual given the nature of the firm’s activity.
b. They are nonrecurring.
c. They are material in amount.
d. They result from terminated involvement in a line of business.
Copyright Cengage Learning. Powered by Cognero. Page 1
,Name: Class: Date:
Chap 01_10e
9. Which of the following is not considered to be a liability?
a. Wages payable.
b. Accounts payable.
c. Notes payable.
d. Cost of goods sold.
10. The ______ sets forth the sequence of activities involved in the creation, manufacture and distribution of its
products and services. Select the best term to complete the sentence.
a. sales to cash cycle
b. value chain
11. The cash basis method of accounting can be best described as:
a. The recording of transactions and adjustments so that debits equal credits.
b. The method that equates assets with liabilities and owners’ equity.
c. The method that recognizes revenue when money is received and expenses when money is paid.
d. The method that matches incurred expenses with related revenues when they are earned.
12. An example of an intangible asset is:
a. A patent
b. Land
c. Investment in another company
d. Raw material inventory
13. On a common size basis, which of the following assets is normally largest for an electric utility?
a. Accounts receivable
b. Inventory
c. Property, Plant and Equipment
d. Cash and Marketable Securities
14. When assessing buyer power using Porter’s five forces, which of the following is not consistent with low buyer
power?
a. Brand loyalty
b. Control of distribution channel
c. Large number of suppliers
d. Low price
15. All of the following are the building blocks for financial statement analysis except:
a. Targeting growth opportunities that diversify exchange rates, risk exposure, and political uncertainty.
b. Describing strategies that a firm pursues to differentiate itself from competitors in order to evaluate
competitive advantages, sustainability of the firm’s earnings, and its risks.
c. Evaluating the financial statements, including the accounting concepts and methods that underlie them and
the quality of the information they provide
d. Identification of the economic characteristics of the industries and the relation of those economic
characteristics to the various financial statement ratios.
Copyright Cengage Learning. Powered by Cognero. Page 2
, Name: Class: Date:
Chap 01_10e
16. Statements that express all items in a particular financial statement as a percentage of some common base are
called ______ statements. Select the best term to complete the sentence.
a. common size
b. income
17. Which of the following is not one of Porter’s five forces?
a. Buyer Power
b. Supplier Power
c. Threat of Regulation
d. Threat of Substitutes
18. Which of the following economic characteristics is consistent with a grocery store chain?
a. Low barriers to entry.
b. High levels of research and development.
c. High profit margins.
d. Low capital intensity.
19. The fourth step in financial statement analysis is using the financial statements to analyze the current profitability,
growth and ______ of the firm. Select the best term to complete the sentence.
a. size
b. risk
20. Which of the following would not appear as a liability on the balance sheet?
a. A labor contract
b. A note due to a bank
c. Salary due employees at year-end
d. Accounts payable
21. Current assets are defined as:
a. Cash and cash equivalents.
b. All assets expected to be quickly used by the firm.
c. Cash and other assets that the firm expects to sell or consume during the normal operating cycle of a
business, usually one year.
d. Cash and other assets that the firm expects maintain for a period including the normal operating cycle of a
business, usually one year.
22. Which of the following is not an activity reported in the Statement of cash Flows?
a. Operating
b. Investing
c. Manufacturing
d. Financing
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