C213 ACCOUNTING FOR DECISION MAKERS (VAC2 TERMS QUESTIONS AND
ANSWERS (2025/2026) (VERIFIED ANSWERS)
Which category on the statement of cash flows summarizes cash receipts and payments to
owners and creditors of the company?
A. Cash flows from investing activities
B. Cash flows from operating activities
C. Cash flows from business activities
D. Cash flows from financing activities - ANSWER-D. Cash flows from financing activities
Where would an investor find a summary of a company's significant accounting policies?
A. In the balance sheet
B. In the income statement
C. In the statement of cash flows
D. In the notes to financial statements - ANSWER-D. In the notes to financial statements
Which assurance does an external audit report provide for its readers?
A. The company will be a good credit risk
B. The company will generate net income
C. The company's financial statements fairly reflect its financial position
D. The company will generate positive cash flows - ANSWER-C. The company's financial
statements fairly reflect its financial position
Match each accounting term with its definition.
,Reliable
Relevant
Material
Conservatism - ANSWER-Reliable - Information that can be verified
Relevant - Information having to do with the matter at hand
Material - Information that is important enough to make a difference
Conservatism - Information related to recognizing losses as they occur
Order the steps in the decision cycle from first (1) to last (5).
Implement Decision
Gather Information
Analyze Financial Statements
Make Decision
Prepare Financial Statements - ANSWER-1 - Prepare Financial Statements
2 - Analyze Financial Statements
3 - Gather Information
4 - Make Decision
5 - Implement Decision
Partial financial information for a company is as follows:
Current assets $36,543
Total assets $58,719
Current liabilities $24,824
Total liabilities $48,561
Stockholders' equity $10,158
, Sales$46,997
Net Income $3,761
Market value of shares $41,316
What is the price-earnings (PE) ratio for this company?
A. 11
B. 12.5
C. 12.9
D. 15.6 - ANSWER-A. 11
What does it mean if a company has a debt ratio of 101.5%?'
A. The company has 1.5% more total liabilities than total assets.
B. The company has 1.5% more total liabilities than gross sales.
C. The company has 1.5% more current liabilities than current assets.
D. The company has 1.5% more total liabilities than net income. - ANSWER-A. The company has
1.5% more total liabilities than total assets.
What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains
the same?
A. Continual decrease in salaries
B. Continual increase in interest
C. Continual increase in taxes
D. Continual decrease in sales - ANSWER-D. Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow?
ANSWERS (2025/2026) (VERIFIED ANSWERS)
Which category on the statement of cash flows summarizes cash receipts and payments to
owners and creditors of the company?
A. Cash flows from investing activities
B. Cash flows from operating activities
C. Cash flows from business activities
D. Cash flows from financing activities - ANSWER-D. Cash flows from financing activities
Where would an investor find a summary of a company's significant accounting policies?
A. In the balance sheet
B. In the income statement
C. In the statement of cash flows
D. In the notes to financial statements - ANSWER-D. In the notes to financial statements
Which assurance does an external audit report provide for its readers?
A. The company will be a good credit risk
B. The company will generate net income
C. The company's financial statements fairly reflect its financial position
D. The company will generate positive cash flows - ANSWER-C. The company's financial
statements fairly reflect its financial position
Match each accounting term with its definition.
,Reliable
Relevant
Material
Conservatism - ANSWER-Reliable - Information that can be verified
Relevant - Information having to do with the matter at hand
Material - Information that is important enough to make a difference
Conservatism - Information related to recognizing losses as they occur
Order the steps in the decision cycle from first (1) to last (5).
Implement Decision
Gather Information
Analyze Financial Statements
Make Decision
Prepare Financial Statements - ANSWER-1 - Prepare Financial Statements
2 - Analyze Financial Statements
3 - Gather Information
4 - Make Decision
5 - Implement Decision
Partial financial information for a company is as follows:
Current assets $36,543
Total assets $58,719
Current liabilities $24,824
Total liabilities $48,561
Stockholders' equity $10,158
, Sales$46,997
Net Income $3,761
Market value of shares $41,316
What is the price-earnings (PE) ratio for this company?
A. 11
B. 12.5
C. 12.9
D. 15.6 - ANSWER-A. 11
What does it mean if a company has a debt ratio of 101.5%?'
A. The company has 1.5% more total liabilities than total assets.
B. The company has 1.5% more total liabilities than gross sales.
C. The company has 1.5% more current liabilities than current assets.
D. The company has 1.5% more total liabilities than net income. - ANSWER-A. The company has
1.5% more total liabilities than total assets.
What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains
the same?
A. Continual decrease in salaries
B. Continual increase in interest
C. Continual increase in taxes
D. Continual decrease in sales - ANSWER-D. Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow?
