MBA 617 Quizzes

the notes to the financial statements included in the 10-K filing.

A large, public company included a consolidated balance sheet in its 10-K filing, which reported property, plant, and equipment net of accumulated depreciation. If a financial statement user wanted to know the details of the individual components of the property, plant, and equipment number and the details of the accumulated depreciation accounts, the user would most likely look to:

from most to least liquid

Under US GAAP, how are current assets ordered on the balance sheet?

present; past; future

a liability is a _______ obligation cause by a ________ transaction or event that must be settled through a _________ transfer of assets or provision of services

income statement, statement of retained earnings, balance sheet, statement of cash flows

which of the following represents the correct order or preparation of the financial statements

statement of financial position

the balance sheet is also known as the _____________________

true

the word "receivable" is often used in asset accounts... the word "payable" is often used in liability accounts

true

stockholders' equity represents the difference between a company's assets and liabilities

false

when a corporation needs additional resources to expand its business operations, the only source for additional funding is issuing new shares of stock

false

some accounting transactions affect only one account

true

a transaction caused an increase in a company's accounts receivable. the accounting equation would remain in balance if one of the company's equity accounts increased by the same amount

claiming that secrecy was critical to the future success of his business

Ivar Kreuger was able to successfully continue his fraudulent scheme for years by not providing investors and creditors audited financial information. Kreuger justified this approach of non-disclosure by:

false

the Securities and Exchange Commission (SEC) was created through the Securities Act of 1933

true

violations of the business entity concept are more common with small businesses than big, publicly traded businesses

true

the Sarbanes-Oxley Act of 2002 (SOX) required a company's CEO and CFO to take responsibility for and sign off on the accuracy of its financial statement disclosures

false

most publicly-traded companies only issue financial statements that capture accounting information for a full year

the stock price changed because the company issued negative future guidance

a company just issued an earnings press release, announcing that earnings per share (EPS) for the most recent quarter was $0.72. the EPS expectation for that quarter was $0.70. immediately after the press release the stock price went down by 9%. which of the following is most likely the explanation for this change?

inventory that was purchased in 20X1 and sold to customers in 20X2 was recorded as an expense in 20X2

the matching principle is best represented by which of the following?

useful for decision making

according to the Financial Accounting Standards Board (FASB), the objective of general purpose financial reporting is to provide financial information about the reporting entity that is:

reliability

accountants place considerable emphasis on consistency because it improves the _______________ of the information reported to external parties

Securities and Exchange Commission

The Financial Accounting Standards Board gets its authority from which of the following organizations?

Cash dividends were declared and paid to shareholders during the year

Which of the following, considered on its own, would cause a decrease in Retained Earnings?

gross profit

The difference between a company's sales and cost of goods sold is:

statement of operations

another name for the income statement is the:

cash used to purchase land

which of the following transactions is most likely reflected in a company's investing activities section of the Statement of Cash Flows?

sales

when preparing a common-size Income Statement, each account on the Income statement should be divided by:

True

an Income Statement captures a company's activity over a period of time (i.e., from January 1st to December 31st)

true

one goal of the Statement of Retained Earnings is to calculate the end-of-period balance of Retained Earnings for use on the Balance Sheet

false

service companies report revenue, cost of goods sold, gross profit, and operating income on their income statements.

true

when preparing a common-size Balance sheet, all Balance Sheet Accounts should be divided by total assets

false

A Statement of Cash Flows captures a company's cash information at a specific point in time (i.e., on December 31st).

Form 10-K

Public companies listed on stock exchanges in the US are required to file which of the following forms to provide audited financial statements in their annual report to stockholders?

the amount of cash a company holds across all its bank accounts

Which of the following would generally be captured in monetary units on financial statements?

true

If a company uses an annual accounting period other than January 1 through December 31, it's generally because the company's business cycle does not conform to the calendar year.

false

Under US GAAP, all assets owned and controlled by a company are reported on the balance sheet at their current fair market value.

equipment

Which of the following assets is least likely to be reported as a current asset?

most to least liquid

Under US GAAP, how are current assets ordered on the balance sheet?

income statement, statement of retained earnings, balance sheet, statement of cash flows

Which of the following represents the correct order or preparation of the financial statements?

true

When a cost is "capitalized", it is reported on the balance sheet as an asset.

false

A balance sheet reports a company's assets, liabilities, and equities for a period of time (i.e., 1/1 to 12/31).

false

The Public Company Accounting Oversight Board (PCAOB), which governs the audit process of public companies, was created through the Securities Exchange Act of 1934.

going concern

the assumption that a business entity will continue normal operations into the foreseeable future (not declare bankruptcy and liquidate) is represented by which of the following concepts or assumptions?

false

all transactions impact the Income Statement, but not all transactions impact the Balance Sheet

$40 million

On December 31, 2023, Oxford, Inc. had $100 million in total assets, which included $20 million in current assets and $10 million in accumulated depreciation. The company had $15 million in current liabilities and $45 million in noncurrent liabilities. What was the company's total stockholders' equity balance?

false

operating income is another name for net income

true

The sum of the results from the three sections of the Statement of Cash Flows equals the difference between the beginning and ending cash balances on the Balance Sheet.

net income

When calculating cash flows from operating activities, a company generally uses ______________________ as a starting point, and makes several adjustments.

lending activities

Each of the following is reported as a section of the Statement of Cash Flows, except:

Financial Accounting Standards Board

Generally accepted accounting principles (GAAP) in the US is set by which of the following organizations?

opinion that, based on evidence considered, the financial statements fairly present Walmarts financial position for the years covered in the audit.

Walmart's 10-K filing included a document titled, "Report of Independent Registered Public Accounting Firm". This document details the audit firm's:

the transaction providing the entity control over the asset has either already occurred or will occur within the next year

An asset has four key characteristics. Which of the following is not one of those characteristics?

a cost incurred in the current period that won't be paid until a future period.

An accrued expense is a liability account, which represents

indirect method

For publicly-traded US companies, which method of preparation is most common for the operating section of the Statement of Cash Flows?

false

The Net Profit Margin is a calculation of the percentage of each sales dollar left to cover selling, general, and administrative expenses

true

A company calculates its current ratio as current assets divided by current liabilities. If a company has a current ratio below 1, it means the company has more current liabilities than it has current assets

true

The gross profit margin of a company in the retail grocery industry is likely lower than the gross profit margin of a company in the airplane manufacturing industry

false

All financial ratios can be calculated using amounts pulled directly from a company's Income Statement, Balance Sheet, and/or Statement of Cash Flows

false

When a ratio compares a balance sheet item and an income statement item, we generally use "average amounts" from both the balance sheet and the income statement.

return on equity ROE

A DuPont analysis is used to decompose which ratio into three important parts?

debt-to-equity ratio

DuPont analysis decomposes a critical ratio into a relationship between three other ratios. Which of the following is not one of those ratios?

solvency

DuPont analysis decomposes a critical ratio into three components. Which of the following is not one of those components?

comparing ABC,Inc.'s ratio to that of its major competitors or the average for its industry

The managers at ABC, Inc. determined that the company's asset turnover ratio is 1.9. The company's most reasonable next step would be:

purchasing shares of its common stock on the open market

A company decided to take steps to reduce shareholders' equity as a method for improving return on equity. Which of the following steps would be most likely to accomplish the goal of decreasing shareholders' equity?

Some current assets are not liquid enough to easily be used to cover current debt obligations

The quick ratio (or "acid-test ratio") recognizes which of the following?

false

A company used DuPont analysis to determine it needs to take on more debt. Increasing reliance on debt financing will always increase Return on Equity

both ratios provide information about how a company uses debt financing

The financial leverage ratio and the debt-to-equity ratio are similar in which of the following ways?

true

The current ratio and the quick ratio (or the "acid-test ratio") both provide information about a company's ability to meet short-term debt obligations.

inventory turnover

ABC, Inc. is a service business (instead of a manufacturer or merchandiser). Which of the following ratios is likely to be least useful for ABC, Inc.?

quickly, slowly

Accounts receivable turnover and accounts payable turnover provide information about how a company pays and receives cash. In this regard, a company would prefer to receive cash from accounts receivable ___________ and to pay cash related to accounts payable _________

true

The asset turnover ratio for Company A is higher than the asset turnover ratio for Company B. Company A is doing a better job than Company B of using its assets to generate revenue.

true

A company's quick ratio is generally lower than its current ratio.