Test Bank
Financial Accounting For Mbas
By Easton And John Wild
8th Edition
, Module 1
Financial Accounting For Mbas
Learning Objectives – Coverage By Question
True/False Multiple Choice
Lo1 – Explain And Assess The Four Main Business
Activities.
Lo2 – Identify And Discuss The Users And Suppliers
1- 4 1, 2
Of Financial Statement Information.
Lo3 – Describe And Examine The Four Financial
5-10 3-19
Statements, And Define The Accounting Equation.
Lo4 – Explain And Apply The Basics Of Profitability
11-13 20-25
Analysis.
Lo5 – Assess Business Operations Within The
14 26, 27
Context Of A Competitive Environment.
Lo6 – Access Reports Filed With The Sec (Appendix
1a).
Lo7 – Describe The Accounting Principles And
Regulations That Frame Financial Statements 15 28-30
(Appendix 1b).
These Questions Are Available To Assign In Mybusinesscourse.
© Cambridge Business Publishers, 2021
1-1 Financial Accounting For Mbas, 8th Edition
,Module 1: Financial Accounting for MBAs
True/False
Topic: Users Of Financial Statement Information
Lo: 2
1. Shareholders Demand Financial Information Primarily To Assess Profitability And Risk Whereas
Bankers Demand Information Primarily To Assess Cash Flows To Repay Loan Interest And Principal.
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.
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 Information
Lo: 2
3. Publicly Traded Companies Provide Financial Information Primarily To Satisfy The Sec And The
Tax Authorities (That Is, The Internal Revenue Service).
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
Audited Financial Statements (10-K Reports) And Quarterly Audited Financial Statements (10-Q
Reports).
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.
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.
© Cambridge Business Publishers, 2021
Test Bank (T/F & Mc), Module 1 1-2
, 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.
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
Position Over A Period Of Time.
Topic: Accounting Equation
Lo: 3
7. Assets Must Always Equal Liabilities Plus Equity.
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.
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 Flows
Lo: 3
9. A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing And Financing
Activities At A Point In Time.
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’ Equity
Lo: 3
10. An Increase In Common Stock Would Be Reflected In The Statement Of Stockholders’ Equity.
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.
© Cambridge Business Publishers, 2021
1-3 Financial Accounting For Mbas, 8th Edition
Financial Accounting For Mbas
By Easton And John Wild
8th Edition
, Module 1
Financial Accounting For Mbas
Learning Objectives – Coverage By Question
True/False Multiple Choice
Lo1 – Explain And Assess The Four Main Business
Activities.
Lo2 – Identify And Discuss The Users And Suppliers
1- 4 1, 2
Of Financial Statement Information.
Lo3 – Describe And Examine The Four Financial
5-10 3-19
Statements, And Define The Accounting Equation.
Lo4 – Explain And Apply The Basics Of Profitability
11-13 20-25
Analysis.
Lo5 – Assess Business Operations Within The
14 26, 27
Context Of A Competitive Environment.
Lo6 – Access Reports Filed With The Sec (Appendix
1a).
Lo7 – Describe The Accounting Principles And
Regulations That Frame Financial Statements 15 28-30
(Appendix 1b).
These Questions Are Available To Assign In Mybusinesscourse.
© Cambridge Business Publishers, 2021
1-1 Financial Accounting For Mbas, 8th Edition
,Module 1: Financial Accounting for MBAs
True/False
Topic: Users Of Financial Statement Information
Lo: 2
1. Shareholders Demand Financial Information Primarily To Assess Profitability And Risk Whereas
Bankers Demand Information Primarily To Assess Cash Flows To Repay Loan Interest And Principal.
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.
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 Information
Lo: 2
3. Publicly Traded Companies Provide Financial Information Primarily To Satisfy The Sec And The
Tax Authorities (That Is, The Internal Revenue Service).
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
Audited Financial Statements (10-K Reports) And Quarterly Audited Financial Statements (10-Q
Reports).
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.
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.
© Cambridge Business Publishers, 2021
Test Bank (T/F & Mc), Module 1 1-2
, 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.
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
Position Over A Period Of Time.
Topic: Accounting Equation
Lo: 3
7. Assets Must Always Equal Liabilities Plus Equity.
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.
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 Flows
Lo: 3
9. A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing And Financing
Activities At A Point In Time.
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’ Equity
Lo: 3
10. An Increase In Common Stock Would Be Reflected In The Statement Of Stockholders’ Equity.
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.
© Cambridge Business Publishers, 2021
1-3 Financial Accounting For Mbas, 8th Edition
