WGU C201 Business Acumen Chapter 15 & 16:
Accounting and Financial Statements questions with
verified answers
Accrual Accounting Ans✓✓✓ Recognizing revenues and costs when they occur
not when the cash changes hand.
Acid Test (Quick) Ratio Ans✓✓✓ Liquidity ratio
Activity Ratios Ans✓✓✓ Measures effectiveness of management's use of firm
resources.
Balance Sheet Ans✓✓✓ Assets = Liabilities + Owner's Equity.
Left side is what you have (assets).
In descending order most liquid to less.
• Current assets
• Long term assets
The right side is what you owe (liabilities and owner's equity).
In descending order by due date.
• Current liabilities
• Long term liabilities
• Stockholder's equity
Balance Sheet Ans✓✓✓ Snapshot - permanent statement, amounts are carried
over from year to year, shows the firm's financial position on a particular date.
Close out at end of year.
, Cash Budget Ans✓✓✓ Tracks the firm's inflow and outflow.
Should be prepared at least monthly.
It tells you how much cash you have, how much cash you can lend, and where you
could reallocate cash.
Common Stock Ans✓✓✓ Basic form of corporate ownership.
True owners of a corporation.
Vote on major company decisions.
Pay dividend.
Corporation Bonds Ans✓✓✓ Secured bonds (backed by assets).
Unsecured bonds (backed by issuer).
Rates vary.
Current Ratio Ans✓✓✓ Calculated as current assets/current liabilities.
Includes all assets.
Gives you an indication of how many dollars in assets you have versus how many
dollars in current liabilities.
2:1 is a good ratio.
$2 in Assets for every $1 is liability.
Current Ratio Ans✓✓✓ Liquidity ratio
Debt Ratio Ans✓✓✓ Leverage ratio
Accounting and Financial Statements questions with
verified answers
Accrual Accounting Ans✓✓✓ Recognizing revenues and costs when they occur
not when the cash changes hand.
Acid Test (Quick) Ratio Ans✓✓✓ Liquidity ratio
Activity Ratios Ans✓✓✓ Measures effectiveness of management's use of firm
resources.
Balance Sheet Ans✓✓✓ Assets = Liabilities + Owner's Equity.
Left side is what you have (assets).
In descending order most liquid to less.
• Current assets
• Long term assets
The right side is what you owe (liabilities and owner's equity).
In descending order by due date.
• Current liabilities
• Long term liabilities
• Stockholder's equity
Balance Sheet Ans✓✓✓ Snapshot - permanent statement, amounts are carried
over from year to year, shows the firm's financial position on a particular date.
Close out at end of year.
, Cash Budget Ans✓✓✓ Tracks the firm's inflow and outflow.
Should be prepared at least monthly.
It tells you how much cash you have, how much cash you can lend, and where you
could reallocate cash.
Common Stock Ans✓✓✓ Basic form of corporate ownership.
True owners of a corporation.
Vote on major company decisions.
Pay dividend.
Corporation Bonds Ans✓✓✓ Secured bonds (backed by assets).
Unsecured bonds (backed by issuer).
Rates vary.
Current Ratio Ans✓✓✓ Calculated as current assets/current liabilities.
Includes all assets.
Gives you an indication of how many dollars in assets you have versus how many
dollars in current liabilities.
2:1 is a good ratio.
$2 in Assets for every $1 is liability.
Current Ratio Ans✓✓✓ Liquidity ratio
Debt Ratio Ans✓✓✓ Leverage ratio
