,DOWNLOAD THE Test Bank for Financial Accounting for MBAs 7th Edition Easton
n n n n n n n n n n n
Module 1 n
Financial Accounting for MBAs n n n
Learning Objectives – Coverage by question
n n n n n
True/False MultiplenChoice Exercises Problems Essays
LO1n–
1
nExplainnand nassess nthenf ourn
mainnbusiness nactivities.
LO2n–
nIdentif ynand ndiscuss nthenusers n 1-n4 1,n2 2
and nsuppliers nof nfinancialnstate
ment ninf ormation.
LO3n–
nDescribenand nexaminenthenf ou
5-10 3-19 1-8 1-5,n10 3,n4
rnf inancialnstatements, nand ndef
inenthenaccounting nequation.
LO4n–
11-13 20-25 1,n9, n10 6,n7 5
nExplainnand napply nthenbasics n
of nprof itability nanalysis.
LO5n–
nAssess nbusiness noperations n 14 26, n27 8
withinnthencontext nof nancompeti
tivenenvironment.
LO6n–
nAccess nreports nf iled nwithnthen
SECn(Appendix n1A).
LO7n–
nDescribenthen accounting nprin
15 28-30 9 6
ciples nand nregulations nthat nf ra
menf inancialnstatements n(Appe
ndix n1B).
©nCambridgenBusinessnPublishers,n2018
1-1 FinancialnAccounting nfornMBAs,n7thnEdition
mynursytest.store
,DOWNLOAD THE Test Bank for Financial Accounting for MBAs 7th Edition Easton
n n n n n n n n n n n
Module 1: Financial Accounting for MBAs
n n n n n
True/False
Topic:nUsersnofnFinancial nStatement nInformationnL
O:n2
1. Shareholders ndemand nf inancialninf ormationnprimarily nto nassess nprof itability nand nrisk nwhereas nbankers n
demand ninf ormationnprimarily nto nassess ncashnf lows nto nrepay nloanninterest nand nprincipal.
Answer: nTrue
Rationale: nWhilenbothnshareholders nand nbankers nareninterested ninnallntheninf ormationncompanies nprovi
de, nshareholders ncarenabout nmorenabout nancompany’s nprof itability nand nbankers ncarenmorenabout nsolve
ncy nand ncreditworthiness.
Topic:nPubliclynAvailablenFinancial nReports
nLO:n2
2. Publicly ntraded ncompanies narenrequired nto nprovidenquarterly nf inancialnreports ndirectly nto nthenpublic.
Answer: nFalse
Rationale: nCompanies nprovidenelectronic nversions nof nquarterly nf inancialnstatements ntonthenSEC, nwhichn
posts nthemnto nthenInternet nf ornthenpublic nto naccess nthem.
Topic:nUsersnofnFinancial nStatement nInformationnL
O:n2
3. Publicly n traded n companies n providen financialn inf ormationn primarily n ton satisfyn then SECn and n then taxn
authorities n(that nis, nthenInternalnRevenuenService).
Answer: nFalse
Rationale: nDemand nforninf ormationnextendsnto nmany nusers; nthenregulators nsuchnas nthenSECnand nthenIR
Snarenonly nonenclass nof nusers.
Topic:nSECnFilingsnL
O:n2
4. Publicly n traded n companies n must n providen ton then Securities n Exchangen Commissionn annualn auditedn
f inancialnstatements n(10-Knreports)nand nquarterly naudited nf inancialnstatements n(10-Qnreports).
Answer: nFalse
Rationale: nQuarterly nreports ndo nnot nneed nto nbenaudited.
Topic:nBalancenSheet
nLO:n3
5. If n an company n reports n retained n earnings n of n $175.3n millionn onn its n balancen sheet, n it n must n also n report
$175.3nmillionninncash.
Answer: nFalse
Rationale: n Thenaccounting nequationnrequires ntotalnassets nto nequalntotalnliabilities nplus nstockholders’neq
uity. nThat ndoes nnot nimply, nhowever, nthat nliability nand nequity naccounts nrelatendirectly nto nspecif ic nassets.
©nCambridgenBusinessnPublishers,n2018
Test nBank,nModulen1 1-2
mynursytest.store
, DOWNLOAD THE Test Bank for Financial Accounting for MBAs 7th Edition Easton
n n n n n n n n n n n
Topic:nBalancenSheet
nLO:n3
6. Anbalancensheet nshows nancompany’s npositionnovernanperiod nof ntime, nwhereas nannincomenstatement, n st
atement nof nstockholders’nequity, nand nstatement nof ncashnf lows nshownits npositionnatnanpoint ninntime.
Answer: nFalse
Rationale: n Thenstatement nis nrevers ed: nAnbalancensheet nshows nancompany’s npositionnatnanpoint ninntime, n
whereas nannincomenstatement, nstatement nof nequity, nandnstatement nof ncashnf lows nshownitsnpositionn ov
ernanperiod nof ntime.
Topic:nAccountingnEquation
nLO:n3
7. Assets nmust nalways nequalnliabilities nplus nequity.
Answer: nTrue
Rationale: nThenaccounting nequationnis nAssets n= nLiabilities n+ nEquity. nThis nrelationnmust nalways nhold.
Topic:nIncomenStatementnL
O:n3
8. Thenincomenstatement nreports nnet nincomenwhichnis ndef ined nas nthencompany’s nprofit naf ternallnexpenses n
and ndividends nhavenbeennpaid.
Answer: nFalse
Rationale: n Thenstatement ncontains ntwo nerrors. nFirst,nnetnincomendoes nnot nincludenany ndividends nduring
nthenperiod;nthesenarenandistributionnof nprof its nand nnotnpart nof nits ncalculation. nSecond, nthenincomenstate
ment nis nprepared nonnannaccrualnbasis nand nthus nincludes nexpenses nincurred n(as nopposed nto npaid).
Topic:nStatementnofnCashnFlowsn
LO:n3
9. Anstatement nof ncashnflows nreports nonncashnflows nfornoperating, ninvestingnand n financing nactivities nat nanp
oint ninntime.
Answer: n False
Rationale: n Anstatement nof ncashnf lows nreportsnonncashnflows nfornoperating, ninvesting,nand nf inancing nacti
vities novernanperiod nof ntime.
Topic:nStatementnofnS tockholders’ nEquity nL
O:n3
10. Annincreaseninncommonnstock nwould nbenref lected ninnthenstatement nof nstockholders’nequity.
Answer: n True
Rationale: n Thenstatement nof nstockholders’nequity nreportsnonnchanges ninnthenaccountsnthat nmakenup nst
ockholders’nequity. nThis nincludes ncontributed ncapital, nretained nearnings, nand nothernequity.
©nCambridgenBusinessnPublishers,n2018
1-3 FinancialnAccounting nfornMBAs,n7thnEdition
mynursytest.store
n n n n n n n n n n n
Module 1 n
Financial Accounting for MBAs n n n
Learning Objectives – Coverage by question
n n n n n
True/False MultiplenChoice Exercises Problems Essays
LO1n–
1
nExplainnand nassess nthenf ourn
mainnbusiness nactivities.
LO2n–
nIdentif ynand ndiscuss nthenusers n 1-n4 1,n2 2
and nsuppliers nof nfinancialnstate
ment ninf ormation.
LO3n–
nDescribenand nexaminenthenf ou
5-10 3-19 1-8 1-5,n10 3,n4
rnf inancialnstatements, nand ndef
inenthenaccounting nequation.
LO4n–
11-13 20-25 1,n9, n10 6,n7 5
nExplainnand napply nthenbasics n
of nprof itability nanalysis.
LO5n–
nAssess nbusiness noperations n 14 26, n27 8
withinnthencontext nof nancompeti
tivenenvironment.
LO6n–
nAccess nreports nf iled nwithnthen
SECn(Appendix n1A).
LO7n–
nDescribenthen accounting nprin
15 28-30 9 6
ciples nand nregulations nthat nf ra
menf inancialnstatements n(Appe
ndix n1B).
©nCambridgenBusinessnPublishers,n2018
1-1 FinancialnAccounting nfornMBAs,n7thnEdition
mynursytest.store
,DOWNLOAD THE Test Bank for Financial Accounting for MBAs 7th Edition Easton
n n n n n n n n n n n
Module 1: Financial Accounting for MBAs
n n n n n
True/False
Topic:nUsersnofnFinancial nStatement nInformationnL
O:n2
1. Shareholders ndemand nf inancialninf ormationnprimarily nto nassess nprof itability nand nrisk nwhereas nbankers n
demand ninf ormationnprimarily nto nassess ncashnf lows nto nrepay nloanninterest nand nprincipal.
Answer: nTrue
Rationale: nWhilenbothnshareholders nand nbankers nareninterested ninnallntheninf ormationncompanies nprovi
de, nshareholders ncarenabout nmorenabout nancompany’s nprof itability nand nbankers ncarenmorenabout nsolve
ncy nand ncreditworthiness.
Topic:nPubliclynAvailablenFinancial nReports
nLO:n2
2. Publicly ntraded ncompanies narenrequired nto nprovidenquarterly nf inancialnreports ndirectly nto nthenpublic.
Answer: nFalse
Rationale: nCompanies nprovidenelectronic nversions nof nquarterly nf inancialnstatements ntonthenSEC, nwhichn
posts nthemnto nthenInternet nf ornthenpublic nto naccess nthem.
Topic:nUsersnofnFinancial nStatement nInformationnL
O:n2
3. Publicly n traded n companies n providen financialn inf ormationn primarily n ton satisfyn then SECn and n then taxn
authorities n(that nis, nthenInternalnRevenuenService).
Answer: nFalse
Rationale: nDemand nforninf ormationnextendsnto nmany nusers; nthenregulators nsuchnas nthenSECnand nthenIR
Snarenonly nonenclass nof nusers.
Topic:nSECnFilingsnL
O:n2
4. Publicly n traded n companies n must n providen ton then Securities n Exchangen Commissionn annualn auditedn
f inancialnstatements n(10-Knreports)nand nquarterly naudited nf inancialnstatements n(10-Qnreports).
Answer: nFalse
Rationale: nQuarterly nreports ndo nnot nneed nto nbenaudited.
Topic:nBalancenSheet
nLO:n3
5. If n an company n reports n retained n earnings n of n $175.3n millionn onn its n balancen sheet, n it n must n also n report
$175.3nmillionninncash.
Answer: nFalse
Rationale: n Thenaccounting nequationnrequires ntotalnassets nto nequalntotalnliabilities nplus nstockholders’neq
uity. nThat ndoes nnot nimply, nhowever, nthat nliability nand nequity naccounts nrelatendirectly nto nspecif ic nassets.
©nCambridgenBusinessnPublishers,n2018
Test nBank,nModulen1 1-2
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, DOWNLOAD THE Test Bank for Financial Accounting for MBAs 7th Edition Easton
n n n n n n n n n n n
Topic:nBalancenSheet
nLO:n3
6. Anbalancensheet nshows nancompany’s npositionnovernanperiod nof ntime, nwhereas nannincomenstatement, n st
atement nof nstockholders’nequity, nand nstatement nof ncashnf lows nshownits npositionnatnanpoint ninntime.
Answer: nFalse
Rationale: n Thenstatement nis nrevers ed: nAnbalancensheet nshows nancompany’s npositionnatnanpoint ninntime, n
whereas nannincomenstatement, nstatement nof nequity, nandnstatement nof ncashnf lows nshownitsnpositionn ov
ernanperiod nof ntime.
Topic:nAccountingnEquation
nLO:n3
7. Assets nmust nalways nequalnliabilities nplus nequity.
Answer: nTrue
Rationale: nThenaccounting nequationnis nAssets n= nLiabilities n+ nEquity. nThis nrelationnmust nalways nhold.
Topic:nIncomenStatementnL
O:n3
8. Thenincomenstatement nreports nnet nincomenwhichnis ndef ined nas nthencompany’s nprofit naf ternallnexpenses n
and ndividends nhavenbeennpaid.
Answer: nFalse
Rationale: n Thenstatement ncontains ntwo nerrors. nFirst,nnetnincomendoes nnot nincludenany ndividends nduring
nthenperiod;nthesenarenandistributionnof nprof its nand nnotnpart nof nits ncalculation. nSecond, nthenincomenstate
ment nis nprepared nonnannaccrualnbasis nand nthus nincludes nexpenses nincurred n(as nopposed nto npaid).
Topic:nStatementnofnCashnFlowsn
LO:n3
9. Anstatement nof ncashnflows nreports nonncashnflows nfornoperating, ninvestingnand n financing nactivities nat nanp
oint ninntime.
Answer: n False
Rationale: n Anstatement nof ncashnf lows nreportsnonncashnflows nfornoperating, ninvesting,nand nf inancing nacti
vities novernanperiod nof ntime.
Topic:nStatementnofnS tockholders’ nEquity nL
O:n3
10. Annincreaseninncommonnstock nwould nbenref lected ninnthenstatement nof nstockholders’nequity.
Answer: n True
Rationale: n Thenstatement nof nstockholders’nequity nreportsnonnchanges ninnthenaccountsnthat nmakenup nst
ockholders’nequity. nThis nincludes ncontributed ncapital, nretained nearnings, nand nothernequity.
©nCambridgenBusinessnPublishers,n2018
1-3 FinancialnAccounting nfornMBAs,n7thnEdition
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