TESTBANKFORFINANCIALACCOUNTING FOR MBAS
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8TH EDITION BY EASTON
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, Module1 n
FinancialAccountingforMBAs n n n
LearningObjs–Coveragebyquestion n n n n n
True/False Multiple Choice
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LO1 – Explain and assess the four main business
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activities.
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LO2 – Identify and discuss the users and suppliers of
1- 4 1, 2
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financial statement information.
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LO3 –Describe and examine the four financial
5-10 3-19
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statements, and define the accounting equation.
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LO4 – Explain and apply the basics of profitability
11-13 20-25
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analysis.
n
LO5 – Assess business operations within the context of
14 26, 27
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a competitive environment.
n
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LO6 – Access reports filed with the SEC (Appendix 1A).
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LO7 –Describe the accounting principles and
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regulations that frame financial statements (Appendix
n n n n n n 15 28-30
1B).
n
These questions are available to assign in myBusinessCourse.
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© Cambridge Business Publishers, 2021
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1-1 Financial Accounting for MBAs, 8th Edition
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,Module1: Financial Accounting for MBAs n n n n n
True/False
TOPIC:Users of Financial Statement Information LO: n n n n n
2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
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demand information primarily to assess cash flows to repay loan interest and principal.
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ACCURATE ANSWER:-True n
Reasoning:->>->>>While both shareholders and bankers are interested in all the information companies n n n n n n n n n n n
provide, shareholders care about more about a firm’s profitability and bankers care more about solvency
n n n n n n n n n n n n n n n
and creditworthiness.
n n
TOPIC:Publicly Available Financial Reports n n n
LO: 2
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2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
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ACCURATE ANSWER:-False n
Reasoning:->>->>>Companies provide electronic versions of quarterly financial statements to the SEC, n n n n n n n n n n
which posts them to the Internet for the public to access them.
n n n n n n n n n n n n
TOPIC:Users of Financial Statement Information LO: n n n n n
2
3. Publicly traded companies provide financial information primarily to satisfy the SEC and the
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tax authorities (that is, the Internal Revenue Service).
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ACCURATE ANSWER:-False n
Reasoning :->>->>>Demand for information extends to many users; the regulators such as the SEC and
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the IRS are only one class of users.
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TOPIC:SECFilings LO: n n
2
4. Publicly traded companies must provide to the Securities Exchange Commission annual
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audited financial statements (10-K reports) and quarterly audited financial statements (10-Q reports).
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ACCURATE ANSWER:-False n
Reasoning:->>->>>Quarterly reports do not need to be audited. n n n n n n n
TOPIC:Balance
Sheet LO: 3
n n n
5. If a firm reports retained earnings of $175.3 million on its balance sheet, it must also report
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$175.3 million in cash. n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>The accounting equation requires total assets to equal total liabilities plus n n n n n n n n n n
stockholders’ equity. That does not imply, however, that liability and equity accounts relate directly to
n n n n n n n n n n n n n n n
specific assets.
n n
© Cambridge Business Publishers, 2021
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Test Bank (T/F & MC), Module 1
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, TOPIC:Balance
Sheet LO: 3
n n n
6. A balance sheet shows a firm’s position over a period of time, whereas an income statement,
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statement of stockholders’ equity, and statement of cash flows show its position at a point in time.
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ACCURATE ANSWER:-False n
Reasoning:->>->>>The statement is reversed: A balance sheet shows a firm’s position at a point in time, n n n n n n n n n n n n n n n
whereas an income statement, statement of equity, and statement of cash flows show its position over a
n n n n n n n n n n n n n n n n n
period of time.
n n n
TOPIC:Accounting
Equation LO: 3
n n n
7. Assets must always equal liabilities plus equity.
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ACCURATE ANSWER:-True n
Reasoning:->>->>>The accounting equation is Assets = Liabilities + Equity. This relation must always hold. n n n n n n n n n n n n n
TOPIC:Income Statement LO: n n
3
8. The income statement reports net income which is defined as the firm’s profit after all expenses and
n n n n n n n n n n n n n n n n
dividends have been paid.
n n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>The statement contains two errors. First, net income does not include any dividends n n n n n n n n n n n n
during the period; these are a distribution of profits and not part of its calculation. Second, the income
n n n n n n n n n n n n n n n n n n
statement is prepared on an accrual basis and thus includes expenses incurred (as opposed to paid).
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TOPIC:Statement of Cash n n
Flows LO: 3
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9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a
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point in time.
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ACCURATE ANSWER:-False n
Reasoning:->>->>>A statement of cash flows reports on cash flows for operating, investing, and n n n n n n n n n n n n
financing activities over a period of time.
n n n n n n n
TOPIC:Statement of Stockholders’ Equity n n n
LO: 3
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10. An increase in common stock would be reflected in the statement of stockholders’ equity.
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ACCURATE ANSWER:-True n
Reasoning:->>->>>The statement of stockholders’ equity reports on changes in the accounts that make n n n n n n n n n n n n
up stockholders’ equity. This includes contributed capital, retained earnings, and other equity.
n n n n n n n n n n n n
1-3 Financial Accounting for MBAs, 8th Edition n n n n n
n n n n n n
8TH EDITION BY EASTON
n n n n
, Module1 n
FinancialAccountingforMBAs n n n
LearningObjs–Coveragebyquestion n n n n n
True/False Multiple Choice
n
LO1 – Explain and assess the four main business
n n n n n n n n
activities.
n
LO2 – Identify and discuss the users and suppliers of
1- 4 1, 2
n n n n n n n n n
financial statement information.
n n
n n n
LO3 –Describe and examine the four financial
5-10 3-19
n n n n n n n
statements, and define the accounting equation.
n n n n n n
LO4 – Explain and apply the basics of profitability
11-13 20-25
n n n n n n n n
analysis.
n
LO5 – Assess business operations within the context of
14 26, 27
n n n n n n n n
a competitive environment.
n
n n n
LO6 – Access reports filed with the SEC (Appendix 1A).
n n n n n n n n n
LO7 –Describe the accounting principles and
n n n n n n
regulations that frame financial statements (Appendix
n n n n n n 15 28-30
1B).
n
These questions are available to assign in myBusinessCourse.
n n n n n n n
© Cambridge Business Publishers, 2021
n n n n
1-1 Financial Accounting for MBAs, 8th Edition
n n n n n
,Module1: Financial Accounting for MBAs n n n n n
True/False
TOPIC:Users of Financial Statement Information LO: n n n n n
2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
n n n n n n n n n n n
demand information primarily to assess cash flows to repay loan interest and principal.
n n n n n n n n n n n n n
ACCURATE ANSWER:-True n
Reasoning:->>->>>While both shareholders and bankers are interested in all the information companies n n n n n n n n n n n
provide, shareholders care about more about a firm’s profitability and bankers care more about solvency
n n n n n n n n n n n n n n n
and creditworthiness.
n n
TOPIC:Publicly Available Financial Reports n n n
LO: 2
n n
2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
n n n n n n n n n n n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>Companies provide electronic versions of quarterly financial statements to the SEC, n n n n n n n n n n
which posts them to the Internet for the public to access them.
n n n n n n n n n n n n
TOPIC:Users of Financial Statement Information LO: n n n n n
2
3. Publicly traded companies provide financial information primarily to satisfy the SEC and the
n n n n n n n n n n n n
tax authorities (that is, the Internal Revenue Service).
n n n n n n n n
ACCURATE ANSWER:-False n
Reasoning :->>->>>Demand for information extends to many users; the regulators such as the SEC and
n n n n n n n n n n n n n n
the IRS are only one class of users.
n n n n n n n n
TOPIC:SECFilings LO: n n
2
4. Publicly traded companies must provide to the Securities Exchange Commission annual
n n n n n n n n n n
audited financial statements (10-K reports) and quarterly audited financial statements (10-Q reports).
n n n n n n n n n n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>Quarterly reports do not need to be audited. n n n n n n n
TOPIC:Balance
Sheet LO: 3
n n n
5. If a firm reports retained earnings of $175.3 million on its balance sheet, it must also report
n n n n n n n n n n n n n n n n
$175.3 million in cash. n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>The accounting equation requires total assets to equal total liabilities plus n n n n n n n n n n
stockholders’ equity. That does not imply, however, that liability and equity accounts relate directly to
n n n n n n n n n n n n n n n
specific assets.
n n
© Cambridge Business Publishers, 2021
n n n n
Test Bank (T/F & MC), Module 1
n n n n n n 1-2
, TOPIC:Balance
Sheet LO: 3
n n n
6. A balance sheet shows a firm’s position over a period of time, whereas an income statement,
n n n n n n n n n n n n n n n
statement of stockholders’ equity, and statement of cash flows show its position at a point in time.
n n n n n n n n n n n n n n n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>The statement is reversed: A balance sheet shows a firm’s position at a point in time, n n n n n n n n n n n n n n n
whereas an income statement, statement of equity, and statement of cash flows show its position over a
n n n n n n n n n n n n n n n n n
period of time.
n n n
TOPIC:Accounting
Equation LO: 3
n n n
7. Assets must always equal liabilities plus equity.
n n n n n n
ACCURATE ANSWER:-True n
Reasoning:->>->>>The accounting equation is Assets = Liabilities + Equity. This relation must always hold. n n n n n n n n n n n n n
TOPIC:Income Statement LO: n n
3
8. The income statement reports net income which is defined as the firm’s profit after all expenses and
n n n n n n n n n n n n n n n n
dividends have been paid.
n n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>The statement contains two errors. First, net income does not include any dividends n n n n n n n n n n n n
during the period; these are a distribution of profits and not part of its calculation. Second, the income
n n n n n n n n n n n n n n n n n n
statement is prepared on an accrual basis and thus includes expenses incurred (as opposed to paid).
n n n n n n n n n n n n n n n n
TOPIC:Statement of Cash n n
Flows LO: 3
n n n
9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a
n n n n n n n n n n n n n n n n
point in time.
n n n
ACCURATE ANSWER:-False n
Reasoning:->>->>>A statement of cash flows reports on cash flows for operating, investing, and n n n n n n n n n n n n
financing activities over a period of time.
n n n n n n n
TOPIC:Statement of Stockholders’ Equity n n n
LO: 3
n n
10. An increase in common stock would be reflected in the statement of stockholders’ equity.
n n n n n n n n n n n n n
ACCURATE ANSWER:-True n
Reasoning:->>->>>The statement of stockholders’ equity reports on changes in the accounts that make n n n n n n n n n n n n
up stockholders’ equity. This includes contributed capital, retained earnings, and other equity.
n n n n n n n n n n n n
1-3 Financial Accounting for MBAs, 8th Edition n n n n n
