TEST BANK FORFINANCIAL ACCOUNTING FOR MBAS
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8TH EDITION BY EASTON
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FinancialAccountingforMBAs rd rd rd
LearningObjs–Coveragebyquestion dr dr rd dr rd
True/False Multiple Choice
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LO1 – Explain and assess the four main business
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activities.
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LO2 – Identify and discuss the users and suppliers of
1- 4 1, 2
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financial statement information.
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LO3 –Describe and examine the four financial
5-10 3-19
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statements, and define the accounting equation.
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LO4 – Explain and apply the basics of profitability
11-13 20-25
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analysis.
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LO5 – Assess business operations within the context of
14 26, 27
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a competitive environment.
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LO6 – Access reports filed with the SEC (Appendix 1A).
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LO7 –Describe the accounting principles and
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regulations that frame financial statements (Appendix
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1B).
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These questions are available to assign in myBusinessCourse.
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© Cambridge Business Publishers, 2021
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1-1 Financial Accounting for MBAs, 8th Edition
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,Module1: Financial Accounting for MBAsdr dr dr dr dr
True/False
TOPIC:Users of Financial Statement Information LO: dr dr dr dr dr
2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
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demand information primarily to assess cash flows to repay loan interest and principal.
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ACCURATE ANSWER:-True dr
Reasoning:->>->>>While both shareholders and bankers are interested in all the information dr dr dr dr dr dr dr dr dr dr
companies provide, shareholders care about more about a firm’s profitability and bankers care more
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about solvency and creditworthiness.
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TOPIC:Publicly Available Financial Reports dr dr dr
LO: 2
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2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
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ACCURATE ANSWER:-False dr
Reasoning:->>->>>Companies provide electronic versions of quarterly financial statements to the dr dr dr dr dr dr dr dr dr
SEC, which posts them to the Internet for the public to access them.
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TOPIC:Users of Financial Statement Information LO: dr dr dr dr dr
2
3. Publicly traded companies provide financial information primarily to satisfy the SEC
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and the tax authorities (that is, the Internal Revenue Service).
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ACCURATE ANSWER:-False dr
Reasoning :->>->>>Demand for information extends to many users; the regulators such as the SEC
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and the IRS are only one class of users.
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TOPIC:SECFilings LO: dr dr
2
4. Publicly traded companies must provide to the Securities Exchange Commission annual
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audited financial statements (10-K reports) and quarterly audited financial statements (10-Q reports).
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ACCURATE ANSWER:-False dr
Reasoning:->>->>>Quarterly reports do not need to be audited. dr dr dr dr dr dr dr
TOPIC:Balance
Sheet LO: 3
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5. If a firm reports retained earnings of $175.3 million on its balance sheet, it must also report
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$175.3 million in cash. dr dr dr
ACCURATE ANSWER:-False dr
Reasoning:->>->>>The accounting equation requires total assets to equal total liabilities plus dr dr dr dr dr dr dr dr dr dr
stockholders’ equity. That does not imply, however, that liability and equity accounts relate directly to
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specific assets.
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© Cambridge Business Publishers, 2021
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Test Bank (T/F & MC), Module 1
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, TOPIC:Balance
Sheet LO: 3
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6. A balance sheet shows a firm’s position over a period of time, whereas an income statement,
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statement of stockholders’ equity, and statement of cash flows show its position at a point in time.
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ACCURATE ANSWER:-False dr
Reasoning:->>->>>The statement is reversed: A balance sheet shows a firm’s position at a point in dr dr dr dr dr dr dr dr dr dr dr dr dr dr
time, whereas an income statement, statement of equity, and statement of cash flows show its
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position over a period of time.
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TOPIC:Accounting
Equation LO: 3
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7. Assets must always equal liabilities plus equity.
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ACCURATE ANSWER:-True dr
Reasoning:->>->>>The accounting equation is Assets = Liabilities + Equity. This relation must always hold. dr dr dr dr dr dr dr dr dr dr dr dr dr
TOPIC:Income Statement LO: dr dr
3
8. The income statement reports net income which is defined as the firm’s profit after all expenses and
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dividends have been paid.
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ACCURATE ANSWER:-False dr
Reasoning:->>->>>The statement contains two errors. First, net income does not include any dr dr dr dr dr dr dr dr dr dr dr
dividends during the period; these are a distribution of profits and not part of its calculation. Second,
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the income statement is prepared on an accrual basis and thus includes expenses incurred (as
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opposed to paid).
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TOPIC:Statement of Cash dr dr
Flows LO: 3
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9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a
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point in time.
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ACCURATE ANSWER:-False dr
Reasoning:->>->>>A statement of cash flows reports on cash flows for operating, investing, and dr dr dr dr dr dr dr dr dr dr dr dr
financing activities over a period of time.
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TOPIC:Statement of Stockholders’ Equity dr dr dr
LO: 3
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10. An increase in common stock would be reflected in the statement of stockholders’ equity.
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ACCURATE ANSWER:-True dr
Reasoning:->>->>>The statement of stockholders’ equity reports on changes in the accounts that dr dr dr dr dr dr dr dr dr dr dr
make up stockholders’ equity. This includes contributed capital, retained earnings, and other equity.
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1-3 Financial Accounting for MBAs, 8th Edition dr dr dr dr dr
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8TH EDITION BY EASTON
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, Module1 dr
FinancialAccountingforMBAs rd rd rd
LearningObjs–Coveragebyquestion dr dr rd dr rd
True/False Multiple Choice
dr
LO1 – Explain and assess the four main business
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activities.
dr
LO2 – Identify and discuss the users and suppliers of
1- 4 1, 2
dr dr dr dr dr dr dr dr dr
financial statement information.
dr dr
dr dr dr
LO3 –Describe and examine the four financial
5-10 3-19
dr d
r dr dr dr dr dr
statements, and define the accounting equation.
dr dr dr dr dr dr
LO4 – Explain and apply the basics of profitability
11-13 20-25
dr dr dr dr dr dr dr dr
analysis.
dr
LO5 – Assess business operations within the context of
14 26, 27
dr dr dr dr dr dr dr dr
a competitive environment.
dr
dr dr dr
LO6 – Access reports filed with the SEC (Appendix 1A).
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LO7 –Describe the accounting principles and
dr d
r dr dr dr dr
regulations that frame financial statements (Appendix
dr dr dr dr dr dr 15 28-30
1B).
dr
These questions are available to assign in myBusinessCourse.
dr dr dr dr dr dr dr
© Cambridge Business Publishers, 2021
dr dr dr dr
1-1 Financial Accounting for MBAs, 8th Edition
dr dr dr dr dr
,Module1: Financial Accounting for MBAsdr dr dr dr dr
True/False
TOPIC:Users of Financial Statement Information LO: dr dr dr dr dr
2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
dr dr dr dr dr dr dr dr dr dr dr
demand information primarily to assess cash flows to repay loan interest and principal.
dr dr dr dr dr dr dr dr dr dr dr dr dr
ACCURATE ANSWER:-True dr
Reasoning:->>->>>While both shareholders and bankers are interested in all the information dr dr dr dr dr dr dr dr dr dr
companies provide, shareholders care about more about a firm’s profitability and bankers care more
dr dr dr dr dr dr dr dr dr dr dr dr dr dr
about solvency and creditworthiness.
dr dr dr dr
TOPIC:Publicly Available Financial Reports dr dr dr
LO: 2
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2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
dr dr dr dr dr dr dr dr dr dr dr dr dr
ACCURATE ANSWER:-False dr
Reasoning:->>->>>Companies provide electronic versions of quarterly financial statements to the dr dr dr dr dr dr dr dr dr
SEC, which posts them to the Internet for the public to access them.
dr dr dr dr dr dr dr dr dr dr dr dr dr
TOPIC:Users of Financial Statement Information LO: dr dr dr dr dr
2
3. Publicly traded companies provide financial information primarily to satisfy the SEC
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and the tax authorities (that is, the Internal Revenue Service).
d r d r d r dr dr dr dr dr dr dr
ACCURATE ANSWER:-False dr
Reasoning :->>->>>Demand for information extends to many users; the regulators such as the SEC
dr dr dr dr dr dr dr dr dr dr dr dr dr
and the IRS are only one class of users.
dr dr dr dr dr dr dr dr dr
TOPIC:SECFilings LO: dr dr
2
4. Publicly traded companies must provide to the Securities Exchange Commission annual
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audited financial statements (10-K reports) and quarterly audited financial statements (10-Q reports).
d r dr dr dr dr dr dr dr dr dr dr dr
ACCURATE ANSWER:-False dr
Reasoning:->>->>>Quarterly reports do not need to be audited. dr dr dr dr dr dr dr
TOPIC:Balance
Sheet LO: 3
dr dr dr
5. If a firm reports retained earnings of $175.3 million on its balance sheet, it must also report
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$175.3 million in cash. dr dr dr
ACCURATE ANSWER:-False dr
Reasoning:->>->>>The accounting equation requires total assets to equal total liabilities plus dr dr dr dr dr dr dr dr dr dr
stockholders’ equity. That does not imply, however, that liability and equity accounts relate directly to
dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr
specific assets.
dr dr
© Cambridge Business Publishers, 2021
dr dr dr dr
Test Bank (T/F & MC), Module 1
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, TOPIC:Balance
Sheet LO: 3
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6. A balance sheet shows a firm’s position over a period of time, whereas an income statement,
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statement of stockholders’ equity, and statement of cash flows show its position at a point in time.
dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr
ACCURATE ANSWER:-False dr
Reasoning:->>->>>The statement is reversed: A balance sheet shows a firm’s position at a point in dr dr dr dr dr dr dr dr dr dr dr dr dr dr
time, whereas an income statement, statement of equity, and statement of cash flows show its
dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr
position over a period of time.
d r d r dr dr dr dr
TOPIC:Accounting
Equation LO: 3
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7. Assets must always equal liabilities plus equity.
dr dr dr dr dr dr
ACCURATE ANSWER:-True dr
Reasoning:->>->>>The accounting equation is Assets = Liabilities + Equity. This relation must always hold. dr dr dr dr dr dr dr dr dr dr dr dr dr
TOPIC:Income Statement LO: dr dr
3
8. The income statement reports net income which is defined as the firm’s profit after all expenses and
dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr
dividends have been paid.
dr dr dr dr
ACCURATE ANSWER:-False dr
Reasoning:->>->>>The statement contains two errors. First, net income does not include any dr dr dr dr dr dr dr dr dr dr dr
dividends during the period; these are a distribution of profits and not part of its calculation. Second,
dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr
the income statement is prepared on an accrual basis and thus includes expenses incurred (as
dr dr dr dr dr dr dr dr dr dr dr dr dr dr dr
opposed to paid).
dr dr dr
TOPIC:Statement of Cash dr dr
Flows LO: 3
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9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a
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point in time.
dr dr dr
ACCURATE ANSWER:-False dr
Reasoning:->>->>>A statement of cash flows reports on cash flows for operating, investing, and dr dr dr dr dr dr dr dr dr dr dr dr
financing activities over a period of time.
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TOPIC:Statement of Stockholders’ Equity dr dr dr
LO: 3
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10. An increase in common stock would be reflected in the statement of stockholders’ equity.
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ACCURATE ANSWER:-True dr
Reasoning:->>->>>The statement of stockholders’ equity reports on changes in the accounts that dr dr dr dr dr dr dr dr dr dr dr
make up stockholders’ equity. This includes contributed capital, retained earnings, and other equity.
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1-3 Financial Accounting for MBAs, 8th Edition dr dr dr dr dr
