Adventis FMC Level 1 Exam with
complete solution
financial statement communicates what? - -- financial condition
- results of operations
- various other activities of an organization
-how board of directors use financial data... - -- hold management
accountable - make board-level decisions about corporate strategy
-how company management uses financial data... - -- measure performance
- make strategic, operating and financial decisions
-how creditors use financial data... - -- measure creditworthiness
- liquidity
- bankruptcy risk
-how investors use financial data... - -make decisions on buying/selling
equity investments
-how acquirers use financial data... - -- determine valuation
- make investment decisions
-how regulators use financial data... - -determine whether company is
operating according to regulations/law
-what does the income statement present? - -results of operations over a
period of time
-what is the purpose of the income statement? - -to show whether the
company made or lost money during the period reported
-what does the income statement indicate? - -how revenues are translated
into net income through subtracting expenses
-revenue (sales) - -amount charged for the delivery of goods or services
-cost of sales (cogs) - -- direct cost of producing revenue
- Ex: raw materials, direct wages, etc.
-gross profit - -- revenue - cogs
- indicates how efficiently labor and materials are used in the production
process
, -operating expenses - -- all other expenses required to run a business
- Ex: management salaries, marketing, travel, etc.
-operating income (EBIT) - -- revenue - cogs - operating expenses
- indicates a company's earning power from ongoing operations
-non-operating expenses - -- expenses not related to regular business of the
company
- Ex: interest expense, restructuring expense, etc.
-corporate taxes - -local and federal income taxes the company incurs
-net income (net earnings) - -- revenue - cogs - operating expenses - non-
operating expenses - taxes
- indicates increase in shareholders' value resulting from operations
-what does the balance sheet show? - -an organization's financial position at
a particular point in time
-what does the balance sheet disclose? - -- the resources an organization
controls (assets)
- the claims on those resources (liabilities and equity)
-what is the basic accounting equation? - -assets = liabilities + equity
-what is the basic accounting equation a foundation for? - -the double entry
bookkeeping system
-what is the double entry bookkeeping system? - -there is a credit for every
debit
-what does the accrual accounting method measure? - -the performance of a
company regardless of when cash transaction occur
-cash - -current assets comprising currency or currency equivalents that can
be accessed immediately
-accounts receivable - -amount owed to an organization from the sale of a
good or service
-fixed assets - -- value of assets and property that can't be easily converted
to cash
- has a useful life of greater than 1 year
- Ex: PPE
-accounts payable - -amount owed to an organization's vendors
complete solution
financial statement communicates what? - -- financial condition
- results of operations
- various other activities of an organization
-how board of directors use financial data... - -- hold management
accountable - make board-level decisions about corporate strategy
-how company management uses financial data... - -- measure performance
- make strategic, operating and financial decisions
-how creditors use financial data... - -- measure creditworthiness
- liquidity
- bankruptcy risk
-how investors use financial data... - -make decisions on buying/selling
equity investments
-how acquirers use financial data... - -- determine valuation
- make investment decisions
-how regulators use financial data... - -determine whether company is
operating according to regulations/law
-what does the income statement present? - -results of operations over a
period of time
-what is the purpose of the income statement? - -to show whether the
company made or lost money during the period reported
-what does the income statement indicate? - -how revenues are translated
into net income through subtracting expenses
-revenue (sales) - -amount charged for the delivery of goods or services
-cost of sales (cogs) - -- direct cost of producing revenue
- Ex: raw materials, direct wages, etc.
-gross profit - -- revenue - cogs
- indicates how efficiently labor and materials are used in the production
process
, -operating expenses - -- all other expenses required to run a business
- Ex: management salaries, marketing, travel, etc.
-operating income (EBIT) - -- revenue - cogs - operating expenses
- indicates a company's earning power from ongoing operations
-non-operating expenses - -- expenses not related to regular business of the
company
- Ex: interest expense, restructuring expense, etc.
-corporate taxes - -local and federal income taxes the company incurs
-net income (net earnings) - -- revenue - cogs - operating expenses - non-
operating expenses - taxes
- indicates increase in shareholders' value resulting from operations
-what does the balance sheet show? - -an organization's financial position at
a particular point in time
-what does the balance sheet disclose? - -- the resources an organization
controls (assets)
- the claims on those resources (liabilities and equity)
-what is the basic accounting equation? - -assets = liabilities + equity
-what is the basic accounting equation a foundation for? - -the double entry
bookkeeping system
-what is the double entry bookkeeping system? - -there is a credit for every
debit
-what does the accrual accounting method measure? - -the performance of a
company regardless of when cash transaction occur
-cash - -current assets comprising currency or currency equivalents that can
be accessed immediately
-accounts receivable - -amount owed to an organization from the sale of a
good or service
-fixed assets - -- value of assets and property that can't be easily converted
to cash
- has a useful life of greater than 1 year
- Ex: PPE
-accounts payable - -amount owed to an organization's vendors
