Financial Reporting Test Answers
·
True or False? The notes to financial
statements are additional information that is added to the beginning of the
financial statements
False
True
True or False? Only businesses use financial
reports.
True
False
Revenue - Expenses = what?
Cost of Sales
Sales Revenue
Gross Revenue
Net income
The cash flow statement details a firm's
_________?
efficiency
liquidity
profitability
True or False? Financial reporting is a
financial statement that is a proper documentation of the financial activities
of a business.
True
False
The general formula for a balance sheet is
Assets = Liabilities * Equity
Assets = Liabilities + Equity
Assets = Liabilities - Equity
Assets = Liabilities / Equity
If the Net Present Value of a project is
postive then __________?
the firm should not invest in the project
the firm should invest in the project
the firm should invest in more than one project
Which of the following is a current asset?
Property
Intangible Assets
Equipment
Accounts Receivable
The GAAP is comprised of:
cost principle
revenue recognition principle
matching principle
(All of these)
The balance sheet reports a company's assets,
liabilities and what?
Profits
Revenue
Expense
Ownership Equity
Financial reports are filled out based on the:
Generally Accepted Accounting Principles
(None of these)
Direct write-off Accounting Principles
If a bond is trading at par, what is its face
value?
102
100
99
101
True or False? Creditors use financial reports
to make decisions on loans.
True
False
The single step income statement approach
totals revenues and subtracts ________?
Expenses
Liabilities
Equity
Assets
True or False? A cash flow statement shows
only the inflows of cash into the company.
True
False
The balance sheet is also referred to as what?
Profit & Loss Report
Statement of Revenue & Expense
Statement of Financial Position
Statement of Comprehensive Income
What does the SEC stand for?
Security Exchange Commission
Security Entitlement Commission
Standard Exchange Commission
An example of an SEC filing is a:
14J
17U
10K
10Z
Which of the following is an example of a
non-current asset?
Property
Prepaid expenses
Cash
Accounts receivable
The full disclosure principle indicates...
that a company must declare its expenses and
revenues together in the same period
when a company will record its revenue
when the cost of something matches up with the
accounting information on the balance sheet
a company must disclose all pertininant information
in regards to the financial statement which would affect an investor's decision
True or False? A personal financial statement
is useful when trying to obtain a loan.
True
False
The Three Parts of the Cash Flow Statements
include Operating, Investing and ______?
Purchasing
Financing
Borrowing
Amoritizating
Accrual Basis Accounting matches what?
Revenues and Expenses
Cash and Expenses
Cash and Revenues
Cash
What does it mean if a company has a negative
EPS?
The company is making money
Cannot happen
The company is losing money
Financial reports are used to find:
EPS
(All of these)
PEG ratio
PE ratio
True of False? Financial statements need to be
audited.
False
True
When are current liabilities due?
Within 6 months
Within one year
After one year
Within 3 months
Which is the correct accounting equation?
assets - liabilities = net worth
asset - net worth = liabilities
net worth - asset = liabilities
liabilities - net worth = asset
An example of a financial report is a:
17U
14J
10Q
20R
If a firm's payout ratio is greater than 1,
the firm is __________?
paying more dividends out than they earned
paying less dividends out than they earned
not paying out any dividends
Which activity is represented first in the
Cash Flow Statements?
Purchasing
Financing
Investing
Operating
What was the purpose of the Sarbanes-Oxley Act
of 2002?
lower taxes on larger corporations
raise taxes on larger corporations
(None of these)
decrease fraudulent activity of businesses
True or False? The diluted earnings per share
is a more reliable way to measure earnings per share.
False
True
True or false? Operating margin is a good tool
when deciding to invest in a company.
False
True
Net profit margin =
Net Profit / Revenue
Net Profit / Expenses
Net Profit * Expenses
Net Profit * Margin
A firm with a low profit margin indicates
__________________?
a lower risk that an increase in sales will erase
profits and result in net loss
a higher risk that an increase in sales will erase
profits and result in net loss
a lower risk that a decline in sales will erase
profits and result in net loss
a higher risk that a decline in sales will erase
profits and result in net loss
True or False? ROA stands for Return on Asset.
True
False
True or False? The balance sheet is a snapshot
of a firm's financial position.
True
False
The matching principle is:
when a company will record its revenue
when the cost of something matches up with the
accounting information on the balance sheet
when a company must disclose all pertininant information
in regards to the financial statement which would affect an investor's decision
that a company must declare its expenses and
revenues together in the same period
An item needed for financial reporting is:
income statement
(All of these)
cash flow statement
a balance sheet
What does the I stand for in EBITDA?
Income
Increase
Intangible
Interest
True or False? A form 8k is used to notify
investors of some meaningful event arising.
False
True
Nowadays most financial statements can be
found on
(All of these)
yahoo finance pages
google finance pages
the SEC website
True or False? Charitable organizations that
are required to publish financial statements do not produce income statements.
Instead they publish statement of activities.
True
False
True or False: The asset turnover ratio
measure the firm's efficient use of its liabilities in generating sales income?
True
False
True or False? Financial reports are not
important in making investment decisions.
False
True
How do you calculate market capitalization?
Share price / Number of shares outstanding
Number of shares outstanding * share price
Share price * total assets
Number of shares outstanding / share price
Who typically needs to approve a financial
statement when they are a SEC filing?
lawyer
(None of these)
employee
accountant
True or False? Dividends appear on the income
statement.
True
False
What are the three parts of a firm's balance
sheet?
Assets, Loss, Profit
Liabilities, Equity, Profit
Assets, Liabilities, Equity
Loss, Profits, Equity
Which of the following is a general purpose
financial report
shareholder reports
(All of these)
investor reports
annual reports
The SEC usually deals with:
private companies
(All of these)
(None of these)
public companies
Which form corresponds to an annual summary?
10Q
4k
10k
8k
The revenue recognition principle is:
that a company must declare its expenses and
revenues together in the same period
when a company will record its revenue
when the cost of something matches up with the
accounting information on the balance sheet
when a company must disclose all pertinent
information in regards to the financial statement which would affect an
investors decision
The cost principle is:
that a company must declare its expenses and
revenues together in the same period
when a company will record its revenue
when the cost of something matches the accounting
information on the balance sheet
when a company must disclose all pertininant
information in regards to the financial statement which would affect an
investors decision
True or False? Earnings per share do not
include taxes for the year.
False
True
If the price per share of a company is $10 and
and its EPS is $1, then what is its PE ratio?
0.1
10
100
(None of these)
Earnings per share = ?
(Net Income - Preferred Stock Dividends) / (Common
Stock Shares Outstanding)
(Preferred Stock Dividends - Net Income) /
(Weighted Average of Common Stock Shares Outstanding)
(Preferred Stock Dividends - Net Income) / (Common
Stock Shares Outstanding)
(Net Income - Preferred Stock Dividends) /
(Weighted Average of Common Stock Shares Outstanding)
A 10Q is a financial report for a company that
is given
once a month
two times a year
once a year
four times a year
In 2001, the International Accounting
Standards Board (IASB) took over from what prior organization?
International Account Standards
Financial Reporting Board
International Accounting Standards Committee
International Financial Reporting Standards
True or False? There are three basic types of
accounting models?
True
False
Current Dividend Yield = ?
(Full Year Dividend) / (Average Market Share Price)
(Average Market Share Price) / (Full Year Dividend)
(Full Year Dividend) / (Current Share Price)
(Current Share Price) / (Full Year Dividend)
How do you calculate goodwill?
total liabilities - total equity
total assets - total liabilities
total assets - total equity
total liabilities - total assets
What do you obtain from this expression:
(Earnings After Tax / Net Profit After Tax) - Payable Dividends
Retained Earnings
Diluted Earnings
Equity
Diluted Equity
The financial crisis of 2008 led to more
(None of these)
(All of these)
transparency
bankruptcies
Operational efficiency is measured by which
part of the DuPont ratio?
equity multiplier
Asset turnover
Profit margin
Return on Asset = Net income / Sales * ?
Total Assets / Sales
Net income / Total assets
Sales * Total Assets
Sales / Total Assets
Which of the following are not considered
financial reports?
3rd party analysis
SEC filings
press releases
auditor's reports
A decrease in non-current assets is _________
net income.
subtracted from
added to
multiplied by
divided by
The DuPont Analysis measures breaks down the
Return of Equity into how many parts?
2
10
3
5
4
The qualitative characteristics of financial
statements include Materiality and
Faith representation
Comparability
Timeliness
True or False? Net operating gains are added
to net income when calculating a cash flows operating activity?
True
False
True or False? The SEC and FASB have similar
duties.
True
False
True or False? Working capital is the money it
takes to pay off its current liabilities.
False
True
True or False? Financial reporting is not
needed by small companies listed on the OTC bulletin board.
False
True
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