Test Bank For Financial
AccountingFor Mbas 8th Edition
By Easton And John Wild
, Module 1
Financial Accounting For Mbas
Learning Objectives – Coverage By Question
True/False Multiple Choice
LO1 – Explain And Assess The Four Main
BusinessActivities.
LO2 – Identify And Discuss The Users And Suppliers
1- 4 1, 2
OfFinancial Statement Information.
LO3 – Describe And Examine The Four
5-10 3-19
Financial Statements, And Define The
Accounting Equation.
LO4 – Explain And Apply The Basics Of
11-13 20-25
ProfitabilityAnalysis.
LO5 – Assess Business Operations Within The
14 26, 27
ContextOf A Competitive Environment.
LO6 – Access Reports Filed With The SEC
(Appendix1A).
LO7 – Describe The Accounting Principles And
Regulations That Frame Financial Statements 15 28-30
(Appendix1B).
These Questions Are Available To Assign In Mybusinesscourse.
,Module 1: Financial Accounting for MBAs
True/False
Topic: Users Of Financial Statement
InformationLO: 2
1. Shareholders Demand Financial Information Primarily To Assess Profitability And Risk Whereas
BankersDemand Information Primarily To Assess Cash Flows To Repay Loan Interest And Principal.
ACCURATE ANSWER: True
Rationale: While Both Shareholders And Bankers Are Interested In All The Information Companies
Provide, Shareholders Care About More About A Company’s Profitability And Bankers Care More
About Solvency And Creditworthiness.
Topic: Publicly Available Financial Reports
LO: 2
2. Publicly Traded Companies Are Required To Provide Quarterly Financial Reports Directly To The Public.
ACCURATE ANSWER: False
Rationale: Companies Provide Electronic Versions Of Quarterly Financial Statements To The SEC,
Which Posts Them To The Internet For The Public To Access Them.
Topic: Users Of Financial Statement
InformationLO: 2
3. Publicly Traded Companies Provide Financial Information Primarily To Satisfy The SEC And
The TaxAuthorities (That Is, The Internal Revenue Service).
ACCURATE ANSWER: False
Rationale: Demand For Information Extends To Many Users; The Regulators Such As The SEC And
The IRS Are Only One Class Of Users.
Topic: SEC Filings
LO: 2
4. Publicly Traded Companies Must Provide To The Securities Exchange Commission Annual
AuditedFinancial Statements (10-K Reports) And Quarterly Audited Financial Statements (10-Q
Reports).
ACCURATE ANSWER: False
Rationale: Quarterly Reports Do Not Need To Be Audited.
Topic: Balance Sheet
LO: 3
5. If A Company Reports Retained Earnings Of $175.3 Million On Its Balance Sheet, It Must Also Report
$175.3 Million In Cash.
ACCURATE ANSWER: False
Rationale: The Accounting Equation Requires Total Assets To Equal Total Liabilities Plus
Stockholders’ Equity. That Does Not Imply, However, That Liability And Equity Accounts Relate
Directly To Specific Assets.
, Topic: Balance Sheet
LO: 3
6. A Balance Sheet Shows A Company’s Position Over A Period Of Time, Whereas An Income
Statement,Statement Of Stockholders’ Equity, And Statement Of Cash Flows Show Its Position At A
Point In Time.
ACCURATE ANSWER: False
Rationale: The Statement Is Reversed: A Balance Sheet Shows A Company’s Position At A Point In
Time, Whereas An Income Statement, Statement Of Equity, And Statement Of Cash Flows Show
Its PositionOver A Period Of Time.
Topic: Accounting Equation
LO: 3
7. Assets Must Always Equal Liabilities Plus Equity.
ACCURATE ANSWER: True
Rationale: The Accounting Equation Is Assets = Liabilities + Equity. This Relation Must Always Hold.
Topic: Income Statement
LO: 3
8. The Income Statement Reports Net Income Which Is Defined As The Company’s Profit After All
Expenses And Dividends Have Been Paid.
ACCURATE ANSWER: False
Rationale: The Statement Contains Two Errors. First, Net Income Does Not Include Any Dividends
During The Period; These Are A Distribution Of Profits And Not Part Of Its Calculation. Second, The
Income Statement Is Prepared On An Accrual Basis And Thus Includes Expenses Incurred (As
Opposed To Paid).
Topic: Statement Of Cash
FlowsLO: 3
9. A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing And Financing
Activities At APoint In Time.
ACCURATE ANSWER: False
Rationale: A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing, And
Financing Activities Over A Period Of Time.
Topic: Statement Of Stockholders’
EquityLO: 3
10. An Increase In Common Stock Would Be Reflected In The Statement Of Stockholders’ Equity.
ACCURATE ANSWER: True
Rationale: The Statement Of Stockholders’ Equity Reports On Changes In The Accounts That Make
Up Stockholders’ Equity. This Includes Contributed Capital, Retained Earnings, And Other Equity.
AccountingFor Mbas 8th Edition
By Easton And John Wild
, Module 1
Financial Accounting For Mbas
Learning Objectives – Coverage By Question
True/False Multiple Choice
LO1 – Explain And Assess The Four Main
BusinessActivities.
LO2 – Identify And Discuss The Users And Suppliers
1- 4 1, 2
OfFinancial Statement Information.
LO3 – Describe And Examine The Four
5-10 3-19
Financial Statements, And Define The
Accounting Equation.
LO4 – Explain And Apply The Basics Of
11-13 20-25
ProfitabilityAnalysis.
LO5 – Assess Business Operations Within The
14 26, 27
ContextOf A Competitive Environment.
LO6 – Access Reports Filed With The SEC
(Appendix1A).
LO7 – Describe The Accounting Principles And
Regulations That Frame Financial Statements 15 28-30
(Appendix1B).
These Questions Are Available To Assign In Mybusinesscourse.
,Module 1: Financial Accounting for MBAs
True/False
Topic: Users Of Financial Statement
InformationLO: 2
1. Shareholders Demand Financial Information Primarily To Assess Profitability And Risk Whereas
BankersDemand Information Primarily To Assess Cash Flows To Repay Loan Interest And Principal.
ACCURATE ANSWER: True
Rationale: While Both Shareholders And Bankers Are Interested In All The Information Companies
Provide, Shareholders Care About More About A Company’s Profitability And Bankers Care More
About Solvency And Creditworthiness.
Topic: Publicly Available Financial Reports
LO: 2
2. Publicly Traded Companies Are Required To Provide Quarterly Financial Reports Directly To The Public.
ACCURATE ANSWER: False
Rationale: Companies Provide Electronic Versions Of Quarterly Financial Statements To The SEC,
Which Posts Them To The Internet For The Public To Access Them.
Topic: Users Of Financial Statement
InformationLO: 2
3. Publicly Traded Companies Provide Financial Information Primarily To Satisfy The SEC And
The TaxAuthorities (That Is, The Internal Revenue Service).
ACCURATE ANSWER: False
Rationale: Demand For Information Extends To Many Users; The Regulators Such As The SEC And
The IRS Are Only One Class Of Users.
Topic: SEC Filings
LO: 2
4. Publicly Traded Companies Must Provide To The Securities Exchange Commission Annual
AuditedFinancial Statements (10-K Reports) And Quarterly Audited Financial Statements (10-Q
Reports).
ACCURATE ANSWER: False
Rationale: Quarterly Reports Do Not Need To Be Audited.
Topic: Balance Sheet
LO: 3
5. If A Company Reports Retained Earnings Of $175.3 Million On Its Balance Sheet, It Must Also Report
$175.3 Million In Cash.
ACCURATE ANSWER: False
Rationale: The Accounting Equation Requires Total Assets To Equal Total Liabilities Plus
Stockholders’ Equity. That Does Not Imply, However, That Liability And Equity Accounts Relate
Directly To Specific Assets.
, Topic: Balance Sheet
LO: 3
6. A Balance Sheet Shows A Company’s Position Over A Period Of Time, Whereas An Income
Statement,Statement Of Stockholders’ Equity, And Statement Of Cash Flows Show Its Position At A
Point In Time.
ACCURATE ANSWER: False
Rationale: The Statement Is Reversed: A Balance Sheet Shows A Company’s Position At A Point In
Time, Whereas An Income Statement, Statement Of Equity, And Statement Of Cash Flows Show
Its PositionOver A Period Of Time.
Topic: Accounting Equation
LO: 3
7. Assets Must Always Equal Liabilities Plus Equity.
ACCURATE ANSWER: True
Rationale: The Accounting Equation Is Assets = Liabilities + Equity. This Relation Must Always Hold.
Topic: Income Statement
LO: 3
8. The Income Statement Reports Net Income Which Is Defined As The Company’s Profit After All
Expenses And Dividends Have Been Paid.
ACCURATE ANSWER: False
Rationale: The Statement Contains Two Errors. First, Net Income Does Not Include Any Dividends
During The Period; These Are A Distribution Of Profits And Not Part Of Its Calculation. Second, The
Income Statement Is Prepared On An Accrual Basis And Thus Includes Expenses Incurred (As
Opposed To Paid).
Topic: Statement Of Cash
FlowsLO: 3
9. A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing And Financing
Activities At APoint In Time.
ACCURATE ANSWER: False
Rationale: A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing, And
Financing Activities Over A Period Of Time.
Topic: Statement Of Stockholders’
EquityLO: 3
10. An Increase In Common Stock Would Be Reflected In The Statement Of Stockholders’ Equity.
ACCURATE ANSWER: True
Rationale: The Statement Of Stockholders’ Equity Reports On Changes In The Accounts That Make
Up Stockholders’ Equity. This Includes Contributed Capital, Retained Earnings, And Other Equity.
