TEST BANK FOR FINANCIAL ACCOUNTING FOR MBAS 8TH EDITION BY EASTON

TEST BANK FOR FINANCIAL ACCOUNTING FOR MBAS 8TH
EDITION BY EASTON

, Module 1
Financial Accounting for MBAs

Learning Objs – Coverage by question
True/False Multiple Choice


LO1 – Explain and assess the four main business activities.




LO2 – Identify and discuss the users and suppliers of financial
1- 4 1, 2
statement information.


LO3 – Describe and examine the four financial statements, and
5-10 3-19
define the accounting equation.


LO4 – Explain and apply the basics of profitability analysis.
11-13 20-25



LO5 – Assess business operations within the context of a
14 26, 27
competitive environment.


LO6 – Access reports filed with the SEC (Appendix 1A).



LO7 – Describe the accounting principles and regulations that
frame financial statements (Appendix 1B). 15 28-30



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.

ACCURATE ANSWER:-True
Reasoning:->>->>>While both shareholders and bankers are interested in all the information companies provide,
shareholders care about more about a firm’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
Reasoning:->>->>>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).

ACCURATE ANSWER:-False
Reasoning :->>->>>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).

ACCURATE ANSWER:-False
Reasoning:->>->>>Quarterly reports do not need to be audited.


TOPIC:Balance Sheet
LO: 3
5. If a firm reports retained earnings of $175.3 million on its balance sheet, it must also report
$175.3 million in cash.

ACCURATE ANSWER:-False
Reasoning:->>->>>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 firm’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
Reasoning:->>->>>The statement is reversed: A balance sheet shows a firm’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.

ACCURATE ANSWER:-True
Reasoning:->>->>>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 firm’s profit after all expenses and dividends have been
paid.

ACCURATE ANSWER:-False
Reasoning:->>->>>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.

ACCURATE ANSWER:-False
Reasoning:->>->>>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.

ACCURATE ANSWER:-True
Reasoning:->>->>>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.




1-3 Financial Accounting for MBAs, 8th Edition