ADVENTIS FMC LEVEL 1 EXAM
QUESTIONS AND ANSWERS
financial statement communicates what? - Correct Answers -- financial condition
- results of operations
- various other activities of an organization
how board of directors use financial data... - Correct Answers -- hold management
accountable - make board-level decisions about corporate strategy
how company management uses financial data... - Correct Answers -- measure
performance
- make strategic, operating and financial decisions
how creditors use financial data... - Correct Answers -- measure creditworthiness
- liquidity
- bankruptcy risk
how investors use financial data... - Correct Answers -make decisions on buying/selling
equity investments
how acquirers use financial data... - Correct Answers -- determine valuation
- make investment decisions
how regulators use financial data... - Correct Answers -determine whether company is
operating according to regulations/law
what does the income statement present? - Correct Answers -results of operations over
a period of time
what is the purpose of the income statement? - Correct Answers -to show whether the
company made or lost money during the period reported
what does the income statement indicate? - Correct Answers -how revenues are
translated into net income through subtracting expenses
revenue (sales) - Correct Answers -amount charged for the delivery of goods or
services
, cost of sales (cogs) - Correct Answers -- direct cost of producing revenue
- Ex: raw materials, direct wages, etc.
gross profit - Correct Answers -- revenue - cogs
- indicates how efficiently labor and materials are used in the production process
operating expenses - Correct Answers -- all other expenses required to run a business
- Ex: management salaries, marketing, travel, etc.
operating income (EBIT) - Correct Answers -- revenue - cogs - operating expenses
- indicates a company's earning power from ongoing operations
non-operating expenses - Correct Answers -- expenses not related to regular business
of the company
- Ex: interest expense, restructuring expense, etc.
corporate taxes - Correct Answers -local and federal income taxes the company incurs
net income (net earnings) - Correct Answers -- revenue - cogs - operating expenses -
non-operating expenses - taxes
- indicates increase in shareholders' value resulting from operations
what does the balance sheet show? - Correct Answers -an organization's financial
position at a particular point in time
what does the balance sheet disclose? - Correct Answers -- the resources an
organization controls (assets)
- the claims on those resources (liabilities and equity)
what is the basic accounting equation? - Correct Answers -assets = liabilities + equity
what is the basic accounting equation a foundation for? - Correct Answers -the double
entry bookkeeping system
what is the double entry bookkeeping system? - Correct Answers -there is a credit for
every debit
what does the accrual accounting method measure? - Correct Answers -the
performance of a company regardless of when cash transaction occur
cash - Correct Answers -current assets comprising currency or currency equivalents
that can be accessed immediately
accounts receivable - Correct Answers -amount owed to an organization from the sale
of a good or service
QUESTIONS AND ANSWERS
financial statement communicates what? - Correct Answers -- financial condition
- results of operations
- various other activities of an organization
how board of directors use financial data... - Correct Answers -- hold management
accountable - make board-level decisions about corporate strategy
how company management uses financial data... - Correct Answers -- measure
performance
- make strategic, operating and financial decisions
how creditors use financial data... - Correct Answers -- measure creditworthiness
- liquidity
- bankruptcy risk
how investors use financial data... - Correct Answers -make decisions on buying/selling
equity investments
how acquirers use financial data... - Correct Answers -- determine valuation
- make investment decisions
how regulators use financial data... - Correct Answers -determine whether company is
operating according to regulations/law
what does the income statement present? - Correct Answers -results of operations over
a period of time
what is the purpose of the income statement? - Correct Answers -to show whether the
company made or lost money during the period reported
what does the income statement indicate? - Correct Answers -how revenues are
translated into net income through subtracting expenses
revenue (sales) - Correct Answers -amount charged for the delivery of goods or
services
, cost of sales (cogs) - Correct Answers -- direct cost of producing revenue
- Ex: raw materials, direct wages, etc.
gross profit - Correct Answers -- revenue - cogs
- indicates how efficiently labor and materials are used in the production process
operating expenses - Correct Answers -- all other expenses required to run a business
- Ex: management salaries, marketing, travel, etc.
operating income (EBIT) - Correct Answers -- revenue - cogs - operating expenses
- indicates a company's earning power from ongoing operations
non-operating expenses - Correct Answers -- expenses not related to regular business
of the company
- Ex: interest expense, restructuring expense, etc.
corporate taxes - Correct Answers -local and federal income taxes the company incurs
net income (net earnings) - Correct Answers -- revenue - cogs - operating expenses -
non-operating expenses - taxes
- indicates increase in shareholders' value resulting from operations
what does the balance sheet show? - Correct Answers -an organization's financial
position at a particular point in time
what does the balance sheet disclose? - Correct Answers -- the resources an
organization controls (assets)
- the claims on those resources (liabilities and equity)
what is the basic accounting equation? - Correct Answers -assets = liabilities + equity
what is the basic accounting equation a foundation for? - Correct Answers -the double
entry bookkeeping system
what is the double entry bookkeeping system? - Correct Answers -there is a credit for
every debit
what does the accrual accounting method measure? - Correct Answers -the
performance of a company regardless of when cash transaction occur
cash - Correct Answers -current assets comprising currency or currency equivalents
that can be accessed immediately
accounts receivable - Correct Answers -amount owed to an organization from the sale
of a good or service
