ACCOUNTING 1 EXAM 3 UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
Evaluation
Answer:
is making judgements and decisions about possible courses of actions based on
analysis and interpretation
Question:
Use the balance sheet and income statement to evaluate
a firm's performance
Answer:
1. Analysis
2. Interpretation
3. Evaluation
Question:
Horizontal Analysis
Answer:
financial statement items are presented as a percentage of their value in the base
year
Question:
Trend Index
Answer:
Dollar amount in year studying/dollar amount in earliest period reported
times 100
Question:
Vertical analysis
Answer:
balance sheet items are presented das a percentage of total assets for that year;
income statement items are presented as. percentage of total sales for that year
Question:
Bank lenders and creditors focus much on _________ and
_________ ratios
Answer:
liquidity, leverage
Question:
Stockholders and potential investors focus much on
__________ and ___________ ratios.
Answer:
profitability, market value
, Question:
1. Assumes one can predict the future using past data
2. Uses historical cost information (neglects inflation)
3. Uses year-end data that may not be representative of the company's usual
financial status
4. Allows companies that are in the same industry to be compared event when
they are not really comparable
5. falis to recognize that a substantial amount of important information is not
included in a company 's financial statements
Answer:
Limitations of Financial Analysis
Question:
highly liquid, interest bearing investments that have maturities of three months or
less when purchased
Answer:
Cash equivalents
Question:
Cash equivalents include
Answer:
savings account, certificates of deposits, money market funds, and treasury bills
and commercial paper
Question:
_________ ____________ on hand to be able to meet day-to-day
business needs as well as pay off any debt obligations
Answer:
Keep enough
Question:
_______ ______ __ _____ on hand (because cash sitting in the
checking account is unproductive because it is not
earning any interest or dividends
Answer:
Don't keep to much
Question:
Internal control
Answer:
is to help protect assets and increase reliability of accounting records. Recall that
CPA auditors are now required to audit the effectiveness of a business' internal
control system
Question:
Unintentional mistakes and intentional mistakes in
accounting are known as
QUESTIONS AND CORRECT ANSWERS
Question:
Evaluation
Answer:
is making judgements and decisions about possible courses of actions based on
analysis and interpretation
Question:
Use the balance sheet and income statement to evaluate
a firm's performance
Answer:
1. Analysis
2. Interpretation
3. Evaluation
Question:
Horizontal Analysis
Answer:
financial statement items are presented as a percentage of their value in the base
year
Question:
Trend Index
Answer:
Dollar amount in year studying/dollar amount in earliest period reported
times 100
Question:
Vertical analysis
Answer:
balance sheet items are presented das a percentage of total assets for that year;
income statement items are presented as. percentage of total sales for that year
Question:
Bank lenders and creditors focus much on _________ and
_________ ratios
Answer:
liquidity, leverage
Question:
Stockholders and potential investors focus much on
__________ and ___________ ratios.
Answer:
profitability, market value
, Question:
1. Assumes one can predict the future using past data
2. Uses historical cost information (neglects inflation)
3. Uses year-end data that may not be representative of the company's usual
financial status
4. Allows companies that are in the same industry to be compared event when
they are not really comparable
5. falis to recognize that a substantial amount of important information is not
included in a company 's financial statements
Answer:
Limitations of Financial Analysis
Question:
highly liquid, interest bearing investments that have maturities of three months or
less when purchased
Answer:
Cash equivalents
Question:
Cash equivalents include
Answer:
savings account, certificates of deposits, money market funds, and treasury bills
and commercial paper
Question:
_________ ____________ on hand to be able to meet day-to-day
business needs as well as pay off any debt obligations
Answer:
Keep enough
Question:
_______ ______ __ _____ on hand (because cash sitting in the
checking account is unproductive because it is not
earning any interest or dividends
Answer:
Don't keep to much
Question:
Internal control
Answer:
is to help protect assets and increase reliability of accounting records. Recall that
CPA auditors are now required to audit the effectiveness of a business' internal
control system
Question:
Unintentional mistakes and intentional mistakes in
accounting are known as
