Question 1

What do financial ratios analyze?
A)the "bottom line"
B)the return to the franchised business owner
C)the "net" profit
D)all of the above

Accepted Answer

The "net" profit is also called the "final profit" or the "bottom line." It is the sum of all revenues minus the sum of all expenses and represents the return to the franchised business owner.Generally,financial ratios are seen as analyzing this figure

Question 2

Which of the following is like a "snapshot" of the franchise's fiscal condition?
A)the cash flow statement
B)the balance sheet
C)the income statement
D)the bottom line

Accepted Answer

The balance sheet is simply a "snapshot" of the fiscal condition of the franchise at a given instant in time

Question 3

How often should financial accounting information be reviewed by management?
A)monthly
B)every fiscal quarter
C)every six months
D)annually

Accepted Answer

Financial accounting provides owners and managers with the information often necessary for making appropriate business decisions.This information should be reviewed by management each fiscal quarter.

Question 4

Franchisors capitalizing or financing their businesses are generally required to disclose three key financial statements.Which of the following is not one of those statements?
A)income statement or operating statement
B)balance sheet or statement of financial position
C)net profit statement or bottom line
D)cash flow or cash budget statement

Accepted Answer

Franchisors are required to disclose three key financial statements: income statement,balance sheet,and cash flow statement

Question 5

Which of the following types of financial ratios measures the ability of the franchise organization to turn sales into profits?
A)activity
B)market
C)profitability
D)coverage/leverage

Accepted Answer

There are five major categories of financial ratios: liquidity,profitability,activity,coverage or leverage,and market.Profitability ratios measure the ability of the franchise organization to turn sales into profits and to generate profit from assets.

Question 6

Which of the following things is NOT true about the accounting process?
A)it sometimes develops an imprecise picture of the franchise.
B)it can measure the exact worth of a franchise.
C)it consists of the measurement and record of money,assets,and resources and their flow through the franchise.
D)its records are not exact.

Accepted Answer

Even good accounting records cannot measure the exact worth of a franchise.A common belief is that accounting records are exact-they are not.Neither the income statement nor the balance sheet information can give more than a rough picture of a business
The figures they contain are rough estimates.All businesses are highly dissimilar and complex and the actual cash,materials,land,buildings,inventory,incentives and morale make it impossible to develop a precise financial picture of the franchise.

Question 7

Which of the following types of financial ratios measures how well a franchise meets its short-term debts or financial obligations?
A)liquidity
B)profitability
C)activity
D)coverage/leverage

Accepted Answer

There are five major categories of financial ratios: liquidity,profitability,activity,coverage or leverage,and market.Liquidity ratios indicate how well the franchise meets its short term-debts or financial obligations.

Question 8

What is the purpose of ratio analyses of financial statements?
A)to gauge the franchise's profit potential
B)to asses the franchisor or franchisee's management skills
C)to determine the success of the franchise in meeting its overall objectives
D)to measure the exact worth of a franchise

Accepted Answer

The general purpose of ratio analyses of financial statements is to determine the success of the franchise in meeting its overall business objectives.These objectives are to meet current obligations and to meet interest costs and repayment of long-term obligations while earning a specific return on invested funds.

Question 9

Which of the following processes involves interpreting a relationship between two financial figures?
A)accounting
B)ratio analysis
C)ledgering
D)cash flow

Accepted Answer

Ratio analysis involves interpreting a relationship between two financial figures.This relationship is commonly expressed as a ratio,percentage,or fraction.

Question 10

A franchise's economic figures must be recorded,then transferred and balanced before final calculations can be determined.Which of the following sequences indicates the path taken by these figures during the accounting process?
A)journal,general ledger,financial statements
B)general ledger,journal,financial statements
C)financial statements,journal,general ledger
D)journal,financial statements,general ledger

Accepted Answer

Income and expense figures are initially entered in an accounting book called the journal.After all entries have been journalized,each transaction is posted (transferred)to the general ledger,which may be a bound book,a computer printout,or even a set of file cards.Once amounts have been posted or ledgered,they are balanced.These balanced amounts are then used to prepare the financial statements.

Quiz 10: Accounting and Financial Statements: Presentation and Uses

What do financial ratios analyze?

Which of the following is like a "snapshot" of the franchise's fiscal condition?

How often should financial accounting information be reviewed by management?

Franchisors capitalizing or financing their businesses are generally required to disclose three key financial statements.Which of the following is not one of those statements?

Which of the following types of financial ratios measures the ability of the franchise organization to turn sales into profits?

Which of the following things is NOT true about the accounting process?

Which of the following types of financial ratios measures how well a franchise meets its short-term debts or financial obligations?

What is the purpose of ratio analyses of financial statements?

Which of the following processes involves interpreting a relationship between two financial figures?

A franchise's economic figures must be recorded,then transferred and balanced before final calculations can be determined.Which of the following sequences indicates the path taken by these figures during the accounting process?