CC 4356 - EXAM 1 Practice Exam - Chap 1 - 6. Questions & Answers. Complete Solutions.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The ability to raise additional cash by selling assets, issuing stock, or borrowing more is: 1) A) a stock price predictor. B) financial flexibility. C) a credit risk indicator. D) one way to project earnings. 2) Creditors assess credit risk by comparing a firm's required principal and interest payments to estimates of the firm's current and future: 2) A) net assets. B) gross income. C) cash flows. D) net income. 3) Relevant financial information: 3) A) is capable of making a difference in a decision. B) is measured in a similar manner among different companies. C) is free from bias and error. D) can be independently verified. 4) To achieve faithful representation, the financial information must be: 4) A) consistent, unbiased, and relevant. B) relevant, consistent, and timely. C) relevant, comparable, and timely. D) complete, neutral, and free from material error. 5) Financial information that is provided to decision makers before it loses its capacity to influence their decisions is: 5) A) consistent. B) neutral. C) verifiable. D) timely. 6) Financial information which does not favor one set of interested parties over another is: 6) A) neutral. B) relevant. C) faithfully represented. D) verifiable. 7) When independent measurers get similar results when using the same accounting measurement methods, the financial information is: 7) A) faithfully represented. B) relevant. C) verifiable. D) timely. 8) Being verifiable and neutral is part of what makes financial information: 8) A) relevant. B) consistent. C) comparable. D) useful. 9) If a company fails to disclose information about a lawsuit because it might be embarrassing to the company, it is violating: 9) A) timeliness. B) neutrality. C) relevance. D) verifiability. 10) Financial information capable of making a difference in a decision is: 10) A) verifiable. B) neutral. C) relevant. D) consistent. 11) To achieve Faithful Representation, accounting information presented must meet which of the following requirements? 11) A) It must depict the underlying economic event, be complete, neutral, and free from material error. B) It must meet a materiality threshold. C) It must have predictive and confirmatory value. D) It must be comparable so that analysts can use it. 12) Whose responsibility is it to ensure that the company's financial information is properly assembled, classified, characterized, and presented clearly and concisely in order to make it