WGU C214 Concepts Only Multi Choice
Version with Complete Solutions
What does a high current ratio indicate about a company?
a) The company has a high level of debt
b) The company may have liquidity issues
✔✔c) The company has sufficient short-term assets to cover its liabilities
d) The company is over-leveraged
Which of the following would be classified as a liability on the balance sheet?
a) Cash
✔✔b) Accounts payable
c) Common stock
d) Retained earnings
What is the role of internal controls in accounting?
a) To ensure that financial statements are audited
✔✔b) To prevent fraud and ensure the accuracy of financial reporting
c) To determine the value of assets
1
,d) To calculate taxes owed
Which of the following is an example of a direct cost in manufacturing?
a) Factory rent
✔✔b) Direct labor
c) Advertising expenses
d) Office supplies
What is the difference between a cash flow statement and an income statement?
a) The cash flow statement shows profitability, while the income statement shows cash inflows
and outflows
b) The income statement tracks cash inflows and outflows, while the cash flow statement shows
profitability
✔✔c) The cash flow statement tracks the movement of cash, while the income statement shows
revenues and expenses
d) There is no difference; they are the same
Which of the following is considered an operating expense for a business?
a) Purchase of new equipment
2
,✔✔b) Rent for office space
c) Issuing stock
d) Borrowing funds
What is the purpose of an income statement for a business?
a) To show how much debt the company owes
b) To track the company’s cash position
✔✔c) To measure the company’s profitability over a period of time
d) To assess the company’s ability to pay dividends
Which of the following is an example of an operating activity in a cash flow statement?
a) Issuing new stock
b) Selling equipment
✔✔c) Paying employee wages
d) Borrowing money
What is the primary purpose of managerial accounting?
a) To prepare external financial statements
3
, ✔✔b) To provide data for internal decision-making
c) To calculate taxes owed
d) To audit financial reports
Which of the following is included in the "cost of goods sold" calculation?
a) Rent for office space
b) Advertising expenses
✔✔c) Direct materials used in production
d) Administrative salaries
Which of the following is a characteristic of a corporation?
✔✔a) Limited liability for shareholders
b) Unlimited liability for shareholders
c) Only one owner
d) No formal structure required
Which financial statement is used to assess a company’s profitability over a specific period of
time?
4
Version with Complete Solutions
What does a high current ratio indicate about a company?
a) The company has a high level of debt
b) The company may have liquidity issues
✔✔c) The company has sufficient short-term assets to cover its liabilities
d) The company is over-leveraged
Which of the following would be classified as a liability on the balance sheet?
a) Cash
✔✔b) Accounts payable
c) Common stock
d) Retained earnings
What is the role of internal controls in accounting?
a) To ensure that financial statements are audited
✔✔b) To prevent fraud and ensure the accuracy of financial reporting
c) To determine the value of assets
1
,d) To calculate taxes owed
Which of the following is an example of a direct cost in manufacturing?
a) Factory rent
✔✔b) Direct labor
c) Advertising expenses
d) Office supplies
What is the difference between a cash flow statement and an income statement?
a) The cash flow statement shows profitability, while the income statement shows cash inflows
and outflows
b) The income statement tracks cash inflows and outflows, while the cash flow statement shows
profitability
✔✔c) The cash flow statement tracks the movement of cash, while the income statement shows
revenues and expenses
d) There is no difference; they are the same
Which of the following is considered an operating expense for a business?
a) Purchase of new equipment
2
,✔✔b) Rent for office space
c) Issuing stock
d) Borrowing funds
What is the purpose of an income statement for a business?
a) To show how much debt the company owes
b) To track the company’s cash position
✔✔c) To measure the company’s profitability over a period of time
d) To assess the company’s ability to pay dividends
Which of the following is an example of an operating activity in a cash flow statement?
a) Issuing new stock
b) Selling equipment
✔✔c) Paying employee wages
d) Borrowing money
What is the primary purpose of managerial accounting?
a) To prepare external financial statements
3
, ✔✔b) To provide data for internal decision-making
c) To calculate taxes owed
d) To audit financial reports
Which of the following is included in the "cost of goods sold" calculation?
a) Rent for office space
b) Advertising expenses
✔✔c) Direct materials used in production
d) Administrative salaries
Which of the following is a characteristic of a corporation?
✔✔a) Limited liability for shareholders
b) Unlimited liability for shareholders
c) Only one owner
d) No formal structure required
Which financial statement is used to assess a company’s profitability over a specific period of
time?
4
