Financial Accounting Ivy Software FINAL exam
with correct answers
From a bankers perspective, the most important ratio on the customers financial
statement is - CORRECT ANSWERS ✔✔Current Ratio
Economic Entity - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔Times interest earned and Payout Ratio
Going Concern - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔False
Monetary Unit - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔True
Accounting Periods - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔Receivables and accounts payable
Revenue/Epense matching - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔Gross margin ratio
Conservatism - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔None
Understandability - CORRECT ANSWERS ✔✔Financial conditions and results
should be communicated so that they are understandable by an educated user of
financial information
Relevance - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔All the above
Consistency - CORRECT ANSWERS ✔✔accounting entities must consistently apply
the elections available to them so that results from different periods can be compared
ROE shows how much income was earned for every dollar invested by owners. T/F -
CORRECT ANSWERS ✔✔True
Materiality - CORRECT ANSWERS ✔✔there is a cost/benefit aspect to financial
reporting; insignificant data need not be reported if it would not affect a user's
decision making
A company's annual report is used primarily by the taxing authorities. T/F -
CORRECT ANSWERS ✔✔True
Managerial accounting is involved in:
external reports
internal reports
tax reports
with correct answers
From a bankers perspective, the most important ratio on the customers financial
statement is - CORRECT ANSWERS ✔✔Current Ratio
Economic Entity - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔Times interest earned and Payout Ratio
Going Concern - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔False
Monetary Unit - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔True
Accounting Periods - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔Receivables and accounts payable
Revenue/Epense matching - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔Gross margin ratio
Conservatism - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔None
Understandability - CORRECT ANSWERS ✔✔Financial conditions and results
should be communicated so that they are understandable by an educated user of
financial information
Relevance - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔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 - CORRECT ANSWERS ✔✔All the above
Consistency - CORRECT ANSWERS ✔✔accounting entities must consistently apply
the elections available to them so that results from different periods can be compared
ROE shows how much income was earned for every dollar invested by owners. T/F -
CORRECT ANSWERS ✔✔True
Materiality - CORRECT ANSWERS ✔✔there is a cost/benefit aspect to financial
reporting; insignificant data need not be reported if it would not affect a user's
decision making
A company's annual report is used primarily by the taxing authorities. T/F -
CORRECT ANSWERS ✔✔True
Managerial accounting is involved in:
external reports
internal reports
tax reports
