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
1- 4 1, 2
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 context
14 26, 27
of a competitive environment.
LO6 – Access reports filed with the SEC (Appendix
1A).
LO7 – Describe the accounting principles and
regulations that frame financial statements (Appendix 15 28-30
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.
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
NSheet NLO: N3
6. A Nbalance Nsheet Nshows Na Nfirm’s Nposition Nover Na Nperiod Nof Ntime, Nwhereas Nan Nincome
Nstatement, Nstatement Nof Nstockholders’ Nequity, Nand Nstatement Nof Ncash Nflows Nshow Nits
Nposition Nat Na Npoint Nin Ntime.
ACCURATE NANSWER:-False
Reasoning:->>->>>The Nstatement Nis Nreversed: NA Nbalance Nsheet Nshows Na Nfirm’s Nposition Nat Na
Npoint Nin Ntime, Nwhereas Nan Nincome Nstatement, Nstatement Nof Nequity, Nand Nstatement Nof Ncash
Nflows Nshow Nits N position N over Na Nperiod Nof Ntime.
TOPIC:Accounting
NEquation NLO: N3
7. Assets Nmust Nalways Nequal Nliabilities Nplus Nequity.
ACCURATE NANSWER:-True
Reasoning:->>->>>The Naccounting Nequation Nis NAssets N= NLiabilities N+ NEquity. NThis Nrelation Nmust Nalways
Nhold.
TOPIC:Income NStatement N LO:
3
8. The Nincome Nstatement Nreports Nnet Nincome Nwhich Nis Ndefined Nas Nthe Nfirm’s Nprofit Nafter Nall
Nexpenses Nand Ndividends Nhave Nbeen Npaid.
ACCURATE NANSWER:-False
Reasoning:->>->>>The Nstatement Ncontains Ntwo Nerrors. NFirst, Nnet Nincome Ndoes Nnot Ninclude Nany
Ndividends Nduring Nthe Nperiod; Nthese Nare Na Ndistribution Nof Nprofits Nand Nnot Npart Nof Nits
Ncalculation. NSecond, Nthe Nincome Nstatement Nis Nprepared Non Nan Naccrual Nbasis Nand Nthus
Nincludes Nexpenses Nincurred N(as Nopposed Nto Npaid).
TOPIC:Statement Nof NCash
NFlows NLO: N3
9. A Nstatement Nof Ncash Nflows Nreports Non Ncash Nflows Nfor Noperating, Ninvesting Nand Nfinancing
Nactivities Nat Na Npoint Nin Ntime.
ACCURATE NANSWER:-False
Reasoning:->>->>>A Nstatement Nof Ncash Nflows Nreports Non Ncash Nflows Nfor Noperating, Ninvesting,
Nand Nfinancing Nactivities Nover Na Nperiod Nof Ntime.
TOPIC:Statement Nof NStockholders’
NEquity NLO: N3
10. An Nincrease Nin Ncommon Nstock Nwould Nbe Nreflected Nin Nthe Nstatement Nof Nstockholders’ Nequity.
ACCURATE NANSWER:-True
Reasoning:->>->>>The Nstatement Nof Nstockholders’ Nequity Nreports Non Nchanges Nin Nthe Naccounts
Nthat Nmake Nup Nstockholders’ Nequity. NThis Nincludes Ncontributed Ncapital, Nretained Nearnings, Nand
Nother Nequity.
1-3 Financial NAccounting Nfor NMBAs, N8th NEdition
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
1- 4 1, 2
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 context
14 26, 27
of a competitive environment.
LO6 – Access reports filed with the SEC (Appendix
1A).
LO7 – Describe the accounting principles and
regulations that frame financial statements (Appendix 15 28-30
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.
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
NSheet NLO: N3
6. A Nbalance Nsheet Nshows Na Nfirm’s Nposition Nover Na Nperiod Nof Ntime, Nwhereas Nan Nincome
Nstatement, Nstatement Nof Nstockholders’ Nequity, Nand Nstatement Nof Ncash Nflows Nshow Nits
Nposition Nat Na Npoint Nin Ntime.
ACCURATE NANSWER:-False
Reasoning:->>->>>The Nstatement Nis Nreversed: NA Nbalance Nsheet Nshows Na Nfirm’s Nposition Nat Na
Npoint Nin Ntime, Nwhereas Nan Nincome Nstatement, Nstatement Nof Nequity, Nand Nstatement Nof Ncash
Nflows Nshow Nits N position N over Na Nperiod Nof Ntime.
TOPIC:Accounting
NEquation NLO: N3
7. Assets Nmust Nalways Nequal Nliabilities Nplus Nequity.
ACCURATE NANSWER:-True
Reasoning:->>->>>The Naccounting Nequation Nis NAssets N= NLiabilities N+ NEquity. NThis Nrelation Nmust Nalways
Nhold.
TOPIC:Income NStatement N LO:
3
8. The Nincome Nstatement Nreports Nnet Nincome Nwhich Nis Ndefined Nas Nthe Nfirm’s Nprofit Nafter Nall
Nexpenses Nand Ndividends Nhave Nbeen Npaid.
ACCURATE NANSWER:-False
Reasoning:->>->>>The Nstatement Ncontains Ntwo Nerrors. NFirst, Nnet Nincome Ndoes Nnot Ninclude Nany
Ndividends Nduring Nthe Nperiod; Nthese Nare Na Ndistribution Nof Nprofits Nand Nnot Npart Nof Nits
Ncalculation. NSecond, Nthe Nincome Nstatement Nis Nprepared Non Nan Naccrual Nbasis Nand Nthus
Nincludes Nexpenses Nincurred N(as Nopposed Nto Npaid).
TOPIC:Statement Nof NCash
NFlows NLO: N3
9. A Nstatement Nof Ncash Nflows Nreports Non Ncash Nflows Nfor Noperating, Ninvesting Nand Nfinancing
Nactivities Nat Na Npoint Nin Ntime.
ACCURATE NANSWER:-False
Reasoning:->>->>>A Nstatement Nof Ncash Nflows Nreports Non Ncash Nflows Nfor Noperating, Ninvesting,
Nand Nfinancing Nactivities Nover Na Nperiod Nof Ntime.
TOPIC:Statement Nof NStockholders’
NEquity NLO: N3
10. An Nincrease Nin Ncommon Nstock Nwould Nbe Nreflected Nin Nthe Nstatement Nof Nstockholders’ Nequity.
ACCURATE NANSWER:-True
Reasoning:->>->>>The Nstatement Nof Nstockholders’ Nequity Nreports Non Nchanges Nin Nthe Naccounts
Nthat Nmake Nup Nstockholders’ Nequity. NThis Nincludes Ncontributed Ncapital, Nretained Nearnings, Nand
Nother Nequity.
1-3 Financial NAccounting Nfor NMBAs, N8th NEdition
