WGU MBA FIRST HALF OF EXAMS (TESTED AND VERRIFIRD EXAM)

WGU MBA FIRST HALF OF EXAMS (TESTED AND VERRIFIRD EXAM) 2023- 2024 Accounting - CORRECT ANSWER-the recording of the day-to-day financial activities of a company and the organization of that information into summary reports used to evaluate the company's financial status Bookkeeping - CORRECT ANSWER-the preservation of a systematic, quantitative record of an activity accounting system - CORRECT ANSWER-used by a business to handle routine bookkeeping tasks and to structure the information so it can be used to evaluate the performance and financial status of the business Accounting information - CORRECT ANSWER-Info that is intended to be useful in making decisions about the future. The balance sheet, the income statement, and the statement of cashflows - CORRECT ANSWER-What are the three primary financial statements? External Users - CORRECT ANSWER-Who is financial accounting information primarily prepared for and used by? Managerial Accounting - CORRECT ANSWER-the name given to accounting systems designed for internal users Balance Sheet - CORRECT ANSWER-Reports a company's assets, liabilities, and owners' equity Income Statement - CORRECT ANSWER-reports the amount of net income earned by a company during a period Net income - CORRECT ANSWER-the excess of a company's revenues over its expenses statement of cash flows - CORRECT ANSWER-reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing FASB - CORRECT ANSWER-Which private body establishes accounting rules in the U.S.? Financial Accounting Standards Board (FASB) - CORRECT ANSWER-a private body established and supported by the joint efforts of the U.S. business community, financial analysts, and practicing accountants The Securities and Exchange Commission (SEC) - CORRECT ANSWER-the organization that regulates U.S. stock exchanges and seeks to create a fair information environment in which investors can buy and sell stocks without fear that companies are hiding or manipulating financial data American Institute of Certified Public Accountants (AICPA) - CORRECT ANSWER-the professional organization of certified public accountants (CPAs) in the United States Public Company Accounting Oversight Board (PCAOB) - CORRECT ANSWER-the organization that inspects the audit practices of registered audit firms and has statutory authority to investigate questionable audit practices and to impose sanctions such as barring an audit firm from auditing SEC-registered companies Internal Revenue Service (IRS) - CORRECT ANSWER-Gov't agency that establishes rules to define exactly when income should be taxed. It has no role in setting financial accounting rules; and a company's financial statements are not used in determining how much tax the company must pay The International Accounting Standards Board (IASB) - CORRECT ANSWEROrganization that was formed to develop a common set of worldwide accounting standards. Its standards are increasingly accepted worldwide, but FASB rules are still the standard in the United States. 1. Rapid Advancements in the IT field 2. the international integration of worldwide business 3. Increased scrutiny associated with large corporate accounting scandals - CORRECT ANSWER-Which 3 factors have combined to make right now a time of significant change in accounting? Sarbanes-Oxley Act - CORRECT ANSWER-A wave of accounting scandals starting in 2001 resulted in this act, which increases U.S. federal government scrutiny of the production of financial statements. Balance Sheet - CORRECT ANSWER-reports a company's financial position at a specified point in time and lists the company's resources (assets), obligations (liabilities), and net ownership interest (owners' equity). Assets - CORRECT ANSWER-probable future economic benefits obtained or controlled by a company as a result of past transactions or events Liabilities - CORRECT ANSWER-probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services in the future as a result of past transactions or events Owners' equity - CORRECT ANSWER-the residual interest in the assets of a company that remains after deducting its liabilities Assets = Liabilities + Owners' Equity - CORRECT ANSWER-What is the accounting equation? By order of liquidity - CORRECT ANSWER-In what order are assets typically listed on the balance sheet? Current and Long-term - CORRECT ANSWER-Liabilities are divided into which 2 categories on the balance sheet? states that the financial results of an economic entity should be reported separately from the financial results of other entities, even though all those entities may be controlled by the same person - CORRECT ANSWER-What is the entity concept? (revenues-expense= net income) - CORRECT ANSWER-Equation to calculate net income When work has been done and collectability of cash can be reasonably assured - CORRECT ANSWER-According to accounting rules, when should revenue be recognized? Operating activities - CORRECT ANSWER-those activities that comprise the day-to-day operations of a business. Investing activities - CORRECT ANSWER-The purchase and sale of long-term assets such as land and equipment are known as _______________. Financing activities - CORRECT ANSWER-those activities through which cash is obtained from, or repaid to, creditors and investors information on the accounting assumptions used in preparing the statements and supplemental information not included in the statements themselves - CORRECT ANSWER-What information do the notes to accounting statements provide? 1. Summary of accounting policy 2. Additional info about summary totals 3. Disclosure of info not included in summary 4. Supplemental disclosure required by FASB or SEC - CORRECT ANSWER-What are the 4 general types of accounting notes? Conservatism - CORRECT ANSWER-the practice of recognizing all losses but not recognizing gains until they are certain Materiality - CORRECT ANSWER-the concept that weighs whether a certain dollar amount is large enough to make a difference to anyone Articulation - CORRECT ANSWER-the idea that the three primary financial statements are interrelated Debt Ratio Total Liabilities/ Total Assets - CORRECT ANSWER-Percentage of funds needed to purchase assets that were obtained through borrowing Current Ratio Current Assets/ Current Liabilities - CORRECT ANSWER-Measure of liquidity; number of times current assets could cover current liabilities Return on Sales Ratio Net Income/ Sales - CORRECT ANSWER-Number of pennies earned during the year on each dollar of sales Asset Turnover Sales/ Total Assets - CORRECT ANSWER-Number of dollars of sales during the year generated by each dollar of assets Return on Equity Net Income/ Stockholder's Equity - CORRECT ANSWER-Number of pennies earned during the year on each dollar invested Price-earnings Ratio Market Value of Shares/ Net Income - CORRECT ANSWER-Amount investors are willing to pay for each dollar of earnings; indication of growth potential 1) to predict a company's future profitability and cash flows 2) to identify and improve potential problem areas - CORRECT ANSWER-What are the two main purposes of financial statement analysis? financial ratios - CORRECT ANSWER-relationships between two financial statement numbers and are often used in analyzing and describing a company's performance financial docs that allow comparison of financial statements across years and between companies and are prepared by dividing all financial statement numbers by sales for the year - CORRECT ANSWER-Common-size financial statements Return on sales is computed as net income divided by sales - CORRECT ANSWER-In terms of ROE, define profitability. Asset turnover is computed as sales divided by assets and is interpreted as the number of dollars in sales generated by each dollar of assets - CORRECT ANSWER-In terms of ROE, define efficiency. Assets-to-equity ratio is computed as assets divided by equity and is interpreted as the number of dollars of assets a company is able to acquire using each dollar invested by stockholders - CORRECT ANSWER-In terms of ROE, define leverage. the profitability of each dollar in sales and turnover is the degree to which assets are used to generate sales - CORRECT ANSWER-Margin NOTE: Companies with a low margin can still earn an acceptable level of return on assets if they have a high turnover. current asset - CORRECT ANSWER-an asset that is expected to be used within one year of the balance sheet date cash, accounts receivable, and inventory - CORRECT ANSWER-What are the most common current assets? Property, plant, and equipment (PPE) - CORRECT ANSWER-What are the primary long-term assets? companies report the intangibles that they have purchased from other companies but not the intangibles that they have developed themselves - CORRECT ANSWER-Which intangible assets are reported on the balance sheet? current liability - CORRECT ANSWER-those obligations that are expected to be paid or otherwise satisfied within one year long-term bank loans, mortgages, and bonds - CORRECT ANSWER-What are 3 common sources of long-term debt? Common stockholders are the true owners of a business; Preferred stockholders give up some of the rights of ownership enjoyed by common stockholders in exchange for some of the safety promised to creditors - CORRECT ANSWER-What is the difference between a common stockholder and a preferred stockholder? Retained Earnings - CORRECT ANSWER-the cumulative amount of corporate profits that have been retained within the business rather than being paid out to stockholders as dividends treasury stock - CORRECT ANSWER-the amount the corporation has spent to buy back its own shares from stockholders 2 years, Comparative side-by-side format - CORRECT ANSWER-How many years worth of balance sheets does a company usually provide and how are they typically formatted? Cash - CORRECT ANSWER-What is the first item that is usually listed on a U.S. balance sheet? Long-term assets - CORRECT ANSWER-What is the first item that is usually listed on a non-U.S. balance sheet? working capital - CORRECT ANSWER-The difference of current assets-current liabilities Recognition (In terms of accounting) - CORRECT ANSWER-the process of condensing all estimates and judgments into one number and reporting that one number in the formal financial statements disclosure - CORRECT ANSWER-An alternative way to report information, describing details in a narrative note Transaction Analysis - CORRECT ANSWER-is the process of determining how an economic event impacts financial statements Asset Mix - CORRECT ANSWER-the proportion of total assets in each asset category that is largely determined by the industry in which the company operates Income from Continuing Operations - CORRECT ANSWER-What is the best measure of sustainable profitability? Gross Profit - CORRECT ANSWER-the difference between the selling price of a product and the cost of the product Operating Income - CORRECT ANSWER-gross profit minus all other expenses except for interest and taxes; measures the performance of the fundamental business operations conducted by a company Income from Continuing Operations - CORRECT ANSWER-operating income minus interest expense, minus income tax expense, and plus or minus other miscellaneous revenue and expense items, and gains and losses from peripheral transactions and events Net Income - CORRECT ANSWER-income from continuing operations plus or minus the results of discontinued operations and extraordinary items, net of their respective income tax effects Comprehensive Income - CORRECT ANSWER-net income plus or minus adjustments for changes in company wealth stemming from changes in certain exchange rates, interest rates, or financial instruments' values Gains, Losses, Revenues, and Expenses - CORRECT ANSWER-What are the 4 primary item categories listed on the income statement? selling goods, providing services, Earning interest by providing loans - CORRECT ANSWER-What are some common business activities that generate revenue? cost of goods sold; selling, general, and administrative expense, depreciation expense, income tax expense, and interest expense - CORRECT ANSWER-What are the key expense items commonly found on the income statement? External - CORRECT ANSWER-Do gains/losses reported on the income statement arise from internal or external activities? Income from discontinued operations and extraordinary items - CORRECT ANSWERWhich items are considered "below-the-line" items? Earnings per Share (EPS) - CORRECT ANSWER-the amount of net income associated with each share of stock When value has been delivered to customers (typically only after the required work has been performed and after the collection of cash is reasonably assured) - CORRECT ANSWER-When should revenue be recognized on an income statement? matching - CORRECT ANSWER-the concept that states that an expense should be recognized in the same period in which the revenue it was used to generate is recognized marketing - CORRECT ANSWER-the process of creating, distributing, promoting and pricing goods, services and ideas to facilitate satisfying exchange relationships with