Question 1

Prattville Manufacturing has applied for a short-term loan with CIBC.The loan officers of the bank are likely to look carefully at Prattville's liquidity ratios before they decide to grant the loan.

Accepted Answer

The liquidity ratios, such as current ratio and quick ratio, provide a measure of a company's ability to meet its short-term obligations. Therefore, lenders may consider these ratios when evaluating the creditworthiness of a borrower and deciding whether to grant a loan.

Question 2

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.

Accepted Answer

Leverage ratios measure the proportion of a company's financing that comes from debt, and therefore indicate the level of financial risk associated with that company.

Question 3

Cash provided by the sale of new cars at Joseph's Car Sales would be listed as a cash inflow from operations on Joseph's statement of cash flows.

Accepted Answer

Cash inflows from operations include revenue generated from the primary business activities, such as selling goods or services, which in this case is the sale of new cars.

Question 4

Jamal is an accountant employed by Acctex,Inc.Jamal is an example of a public accountant.

Accepted Answer

Jamal is an example of a private accountant because he is employed by a specific company, Acctex, Inc., rather than working independently or for an accounting firm that serves multiple clients.

Question 5

Citizens and special interest groups often have interest in the information generated by government accounting.

Accepted Answer

Citizens and special interest groups have a vested interest in the financial activities of the government, which is why they often seek access to the information generated by government accounting.

Question 6

Assets are listed on the balance sheet according to their liquidity.

Accepted Answer

Assets are listed on the balance sheet in order of liquidity, from most liquid (e.g., cash) to least liquid (e.g., long-term investments).

Question 7

Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant.

Accepted Answer

While accounting software has become more advanced and user-friendly, small business owners should still consult with an actual accountant for advice on tax planning, financial analysis, and other important financial decisions.

Question 8

A cash flow statement summarizes a company's cash receipts and cash payments over a period of time.

Accepted Answer

A cash flow statement provides information about a company's cash inflows and outflows during a specific period, allowing investors and analysts to evaluate the company's liquidity and ability to generate cash.

Question 9

The value of what stockholders own in a firm is called stockholders' equity.

Accepted Answer

Stockholders' equity represents the value of the assets that belong to the stockholders after liabilities have been subtracted. It includes common stock, retained earnings, and any other equity accounts.

Question 10

Assets are reported on the balance sheet.

Accepted Answer

Assets are reported on the balance sheet, which is one of the three primary financial statements. The other two are the income statement and the cash flow statement.

Question 11

Accounting provides financial information that can be useful to the owners,creditors,suppliers,employees,and competitors of an organization.

Accepted Answer

Accounting information is useful for various stakeholders such as owners, creditors, suppliers, employees, and competitors for various decision-making purposes.

Question 12

Carol has worked as a bookkeeper for a small clothing store for almost three years.Her old boss recently retired and a new manager took over.The new manager frequently asks her for information and advice about how to interpret the information she records.Carol's experience as a bookkeeper means she is qualified to provide this type of advice.

Accepted Answer

The answer of Carol has worked as a bookkeeper for...

Question 13

A look at the EPS ratio for a corporation will give you insights into its ability to pay a dividend to its stockholders.

Accepted Answer

The EPS (earnings per share) ratio is a measure of a corporation's profitability per share of common stock. A corporation with a high EPS is generally considered more profitable and may have a higher likelihood of being able to pay a dividend to its stockholders.

Question 14

Activities of managerial accountants include measuring and reporting the costs of production,marketing,and other functions within the organization.

Accepted Answer

Managerial accountants are responsible for measuring and reporting the costs of various functions within the organization, including production and marketing. They use this information to make informed decisions and recommend improvements to the organization's operations.

Question 15

Financial accounting is used to provide information and analysis that managers within the organization can use to assist them in decision making.

Accepted Answer

Financial accounting is primarily used to provide information to external users such as investors, creditors, and regulators, rather than managers within the organization. Management accounting, on the other hand, is used to provide information to internal users such as managers to support decision making.

Question 16

A firm's balance sheet reports its financial condition on a specific date.

Accepted Answer

A balance sheet is a snapshot of a company's financial condition on a specific date, typically at the end of a fiscal quarter or year.

Question 17

Financial accountants prepare reports for owners,creditors,suppliers,and others outside of the organization.

Accepted Answer

Financial accountants are responsible for preparing financial reports for external stakeholders such as owners, creditors, suppliers, and regulatory agencies. These reports help in evaluating the financial health of the organization and making important business decisions.

Question 18

Double-entry bookkeeping requires that every transaction be recorded in two places.

Accepted Answer

In double-entry bookkeeping, every transaction is recorded in two accounts, the debit account and the credit account. Therefore, the answer is true that every transaction must be recorded in two places.

Question 19

Churches,schools,and charitable organizations all hire accountants.

Accepted Answer

Churches, schools, and charitable organizations, like any other organization, need to keep track of their finances and comply with tax laws, so hiring an accountant is common.

Question 20

A bookkeeper's first task is to record the firm's transactions in a journal.

Accepted Answer

Yes, a bookkeeper's first task is to record the firm's transactions in a journal. This helps to keep track of all financial activities and serves as a reference point for future use.

Quiz 16: Understanding Accounting and Financial Information