Financial Accounting Ivy Software FINAL
From a bankers perspective, the most important ratio on the customers financial statement is - ✔✔
correct answer Current Ratio
Economic Entity - ✔✔ correct answer 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 answer Times interest earned and Payout Ratio
Going Concern - ✔✔ correct answer 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
answer False
Monetary Unit - ✔✔ correct answer 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 answer True
Accounting Periods - ✔✔ correct answer 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
,Financial Accounting Ivy Software FINAL
receivables and accounts payable
inventory and accounts payable turnover
none of these - ✔✔ correct answer Receivables and accounts payable
Revenue/Epense matching - ✔✔ correct answer 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 answer Gross margin ratio
Conservatism - ✔✔ correct answer 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 answer None
Understandability - ✔✔ correct answer Financial conditions and results should be communicated so that
they are understandable by an educated user of financial information
,Financial Accounting Ivy Software FINAL
Relevance - ✔✔ correct answer 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
answer 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 answer All the above
Consistency - ✔✔ correct answer 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 answer
True
Materiality - ✔✔ correct answer 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 answer True
Managerial accounting is involved in:
, Financial Accounting Ivy Software FINAL
external reports
internal reports
tax reports
economic reports - ✔✔ correct answer Internal reports
Using an accelerated depreciation method for tax purposes would be an example of:
managerial accounting
financial accounting
tax accounting
none - ✔✔ correct answer Tax accounting
Owners in corporations are liable only for the amount they have invested and no more. T/F - ✔✔ correct
answer True
Information that can make a difference to the decision at hand is considered to be:
reliable
comparable
conservatism
understandability
none - ✔✔ correct answer None - relevancy
In a proprietorship:
there is no legal distinction between the business and its owner
there is a distinction between the business and its owner for accounting purposes
From a bankers perspective, the most important ratio on the customers financial statement is - ✔✔
correct answer Current Ratio
Economic Entity - ✔✔ correct answer 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 answer Times interest earned and Payout Ratio
Going Concern - ✔✔ correct answer 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
answer False
Monetary Unit - ✔✔ correct answer 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 answer True
Accounting Periods - ✔✔ correct answer 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
,Financial Accounting Ivy Software FINAL
receivables and accounts payable
inventory and accounts payable turnover
none of these - ✔✔ correct answer Receivables and accounts payable
Revenue/Epense matching - ✔✔ correct answer 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 answer Gross margin ratio
Conservatism - ✔✔ correct answer 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 answer None
Understandability - ✔✔ correct answer Financial conditions and results should be communicated so that
they are understandable by an educated user of financial information
,Financial Accounting Ivy Software FINAL
Relevance - ✔✔ correct answer 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
answer 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 answer All the above
Consistency - ✔✔ correct answer 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 answer
True
Materiality - ✔✔ correct answer 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 answer True
Managerial accounting is involved in:
, Financial Accounting Ivy Software FINAL
external reports
internal reports
tax reports
economic reports - ✔✔ correct answer Internal reports
Using an accelerated depreciation method for tax purposes would be an example of:
managerial accounting
financial accounting
tax accounting
none - ✔✔ correct answer Tax accounting
Owners in corporations are liable only for the amount they have invested and no more. T/F - ✔✔ correct
answer True
Information that can make a difference to the decision at hand is considered to be:
reliable
comparable
conservatism
understandability
none - ✔✔ correct answer None - relevancy
In a proprietorship:
there is no legal distinction between the business and its owner
there is a distinction between the business and its owner for accounting purposes
