General Financial Statements MCQs

1. Net Income Equals:

2. What is an accounting entity?

3. How is the return on assets calculated?

4. Why would investors have an interest in a company's statement of retained earnings?

5. What is another name for the Balance Sheet?

6. What audience is an annual report addressing?

7. What information is found on the Balance Sheet?

8. What is the calculation used on the income statement?

9. What are revenues?

10. What sources of cash flow are included on the statement of cash flows?

11. What is GAAP, and why is it important?

12. Which of the following is NOT one of the four basic financial statements?

13. What should balance on a company’s balance sheet?

14. On a balance sheet, goodwill is an example of what?

15. What agency does a publicly traded company file with if they sell stock?

16. What are retained earnings?

17. True or False? Liabilities and shareholders’ equity must be equal.

18. Which item does not depreciate?

19. What is the basic accounting equation used to calculate the balance sheet?

20. Which two line items are used to calculate Working Capital?

21. What information is found on the Income Statement?

22. A company’s working capital is defined as

23. Which of the following is NOT a primary section of a company’s financial statements?

24. Which of the following is NOT a division of sources and uses of cash flow on the cash flow statement?

25. Almost all financial statements use what form of accounting?

26. Of the following, which is an item that doesn't belong in the heading of a balance sheet?

27. What is an example of a liability?

28. True or False? All expenses required to be paid in the same accounting period.

29. When are current liabilities due to be paid?

30. A measure of the overall efficiency of asset utilization is the:

31. When goods have been sold but not paid for, where are they documented in the balance sheet?

32. Current assets do NOT include which of the following

33. What happens to retained earnings as dividends are declared?

34. What does it mean when a company's stock is volatile?

35. Which corporate officers must certify the accuracy of financial statements?

36. What is the objective of financial statement analysis?

37. The income statement is also called what?

38. What category would cash paid for taxes fall under?

39. What equation is used when calculating the statement of retained earnings?

40. On a balance sheet, which of the following is subject to depreciation?

41. Is net income equal to the net cash generated by operations? Where is net cash reported?

42. Current assets are assets that are intended to be converted into cash or consumed within:

43. What four components are contained in a financial statement?

44. What does the statement of retained earnings tell you about a company's position?

45. What do the footnotes to financial statements typically provide?

46. Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment are referred to as:

47. What is the order in which assets are typically listed on the balance sheet?

48. What's the difference between a Capital lease and an Operational lease?

49. True or false? A company can never have negative income tax liabilities.

50. How do you calculate the Current Ratio?

51. Which component of a financial statement will tell you, ultimately, whether a company has earned or lost money?

52. What is the first statement to calculate before moving on to the statement of retained earnings?

53. How are retained earnings calculated?

54. When all statements and documents are collated, what activity does it allow investors to partake in?

55. All are Profitability Ratios, except:

56. EBITDA is Operating Profit:

57. Income from Operations is equal to Gross Profit less:

58. Parentheses around a number in financial statements indicates what?

59. Companies report accounts receivable at:

60. What is ROE, and why is it important?

61. If you needed to replace machinery at your company, where would you list this on the statement of cash flows?

62. What is Goodwill?

63. SOX stands for:

64. How do you calculate the Quick Ratio?

65. When profits are reinvested into the business, what are they called?

66. Which of the following is NOT a component of the acronym EBITDA?

67. How will a business acquisition typically impact a company’s cash flow?

68. What is the overall objective of using ratio analysis?

69. Which of the following would be reported as a cash inflow from investing activities?

70. Analysis of risk has what intention?

71. Cost of Goods Sold is calculated using which of the following?

72. Which of the following is NOT a method of calculating depreciation?

73. What does it mean when a company's change in cash is negative?

74. The Dividend Payout Ratio is calculated by dividing total dividends by:

75. Which of the following is NOT one of the four GAAP principles?

76. Within the context of stockholders equity, what are cash and other assets considered?

77. Which items are traditionally disclosed separately on an Income Statement?

78. Which of the following is not an element included in the statement of retained earnings?

79. Where would an entry be made for the purchase of goods or services without a contract or note?

80. Gross profit equals

81. What is the final line of the statement of operations?

82. Which value appears on all three components of financial statements?

83. When you have finished calculating your statement of cash flows, where is the final result transferred to?

84. What does a company’s debt-to-equity ratio describe?

85. Why would a creditor heavily scrutinize a company's statement of retained earnings?

86. Which entity is primarily responsible for setting accounting standards?

87. Two figures must be transferred to the balance sheet before the final result can be calculated. What are they, and where are they transferred from?

88. Which of the following does NOT increase cash flows?

89. True or false? A declared dividend decreases shareholders’ equity.

90. In the DuPont system, what is the Return On Equity equal to?

91. On which Financial Statement(s) are Discontinued Operations reported?

92. A financial statement is a smaller piece of a much larger annual document submitted to the Securities Exchange Commission. What is the name of the document?

93. What are the two basic formats of the Income Statement?

94. Using the financial statements, how is Free Cash Flow calculated?

95. Which of the following activities would be regarded as a financing activity on the Statement of Cash Flows?

96. Which of the following is NOT a potential off-balance-sheet liability?

97. In preparing consolidated financial statements, which type of transaction is NOT wholly or partially eliminated?

98. In which section of cash flow statement ,loss on sale of assets is dealt.

99. On a classified Balance Sheet, the asset line items appear in which order?

100. What is the appropriate exchange rate to use when translating the income statement from functional to reporting currency?

101. How is the acid-test ratio calculated?

102. Which components are necessary to compute a company's break-even point?

103. Which basic accounting principle directs accountants to disclose anticipated losses but not anticipated gains?

104. If a share of common stock with a par value of $.01 is issued for $5 the journal entry to record the transaction would be:

105. According to the Financial Accounting Standards Board (FASB), what are UTPs?

106. Which of the following is a contra-asset?

107. A US company invoiced a German company in USD in January and received payment in February. The Euro weakened from January to February. In which section of the financial statements will the US company record the foreign currency gain?

108. If a company is using the installment method of accounting for a project with a gross profit of 30%, how much revenue will be recorded when the initial $100,000 payment is received?

109. An employer grants each of its two employees 10 sick days to be used throughout the year or carried into the next year. Both employees are paid $200 per day. If neither employee used any sick days in Year 1, what amount should be accrued as compensated absence liability at the end of the year?

110. A deferred tax asset would result from which of the following situations:

111. How should a customer overpayment be classified in the financial statements?

112. According to SOX, an audit committee must have AT LEAST how many members?

113. What does a company's Days Sales Outstanding (DSO) reveal?

114. True or false? Freight-out is classified as an operating expense.

115. Which of the following journals entries correctly records the disposal of a fully depreciated piece of machinery from which no proceeds were received?

116. A company lost a building with a book value of $65,000 and fair value of $80,000 to a flood. $20,000 was paid for removal and clean-up. What is the loss on this involuntary conversion?

117. Accumulated Depreciation falls under which of the following categories?

118. Which of the following R&D costs should NOT be expensed?

119. Which of the following is NOT a possible indication that a lease should be considered a Capital lease?

120. Which four components are contained in a financial statement?

121. On a balance sheet, which of the following is not subject to depreciation or amortization?

122. True or false? A declared dividend reduces shareholders’ equity.

123. Where would an entry be made for the purchase of delivered goods or completed services?

124. Where should purchased machinery appear on the statement of cash flows?

125. Which financial statement provide information about economic resources and claims on those resources?

126. The _______________ reports the net cash flows relating to operating, investing, and financing activities for a particular period of time.

127. Which financial statement provide information about inflows and outflows of cash?

128. The _______________ is a measure of a firm's ability to control the level of costs, or expenses, relative to sales.

129. The _______________ provides a measure of the sales generated for each dollar invested in fixed assets.

130. Comparisons of a given firm's ratios with those of other firms for a particular period is referred to as ____________________.

131. The ______________ is computed by dividing net income attributable to common stock by the average number of common shares outstanding during the period.

132. If a company's rate of return on assets is 20 percent and the profit margin percentage is 5 percent, the company's total assets turnover must be which of the following?

133. Which transaction does NOT result in an inflow of cash?

134. Which ratio would NOT be used to assess a firm's long-term liquidity risk?

135. When an auditor feels that an opinion cannot be expressed as to the fairness of a company's financial statements as a whole, he issues a/an ________________ .

136. Which does NOT describe an expense?

137. Which equation is incorrect?

138. The ____________ is the financial statement that presents an overall view of a company's financial position as of a given date.

139. Which would not appear on a Balance Sheet?

140. The ____________ is an agency of the federal government and has the legal authority to set acceptable accounting standards in the United States.

141. Which ratio indicate the proportion of a firm's long term capital that is provided by creditors

142. The ________________ indicates the length of the period between the purchase of inventory on account and the payment of cash to suppliers.

143. In computing the quick ratio, which item is customarily excluded from the numerator?

144. Which term refers to the 'nearness of cash' of a firm

145. The ______________ is a useful measure for assessing a firm's performance in using assets to generate earnings.

146. Which can be described as 'claims on resources that result from benefits previously received by the company, and which require that a specified amount be paid on a specified date'?

147. Which of the following approaches does the Financial Accounting Standards Board follow in establishing generally accepted accounting principles?

148. A ______________ involves comparing a given firm's ratios with those of other firms for a particular period.

149. The ______________ is computed by dividing cash flow from operations by average current liabilities.

150. Which ratio assess the firm's operating performance independently of financing decisions?

151. The ______________ is a private sector group that has been given the responsibility of establishing acceptable accounting standards in the United States.

152. The primary source of cash for most firms should be _______________.

153. XYZ Company sells on credit with terms of Net 30 days. If the company's credit policy and collection activity are working efficiently, how many times should the company's Accounts Receivable turn in a year?

154. The phenomenon of common shareholders trading at extra risk for a potentially higher return is called __________________.

155. Which term refer to the practice of using debt and preferred stock for financing in order to increase the return to the common shareholders' equity?

156. Which of the following organizations, despite the fact that it has no legal authority, has played a role in developing acceptable accounting principles worldwide?

157. XYZ Company reports total assets and total shareholders' eQuity of $375,000 and $220,000, respectively, at the end of its first year of business. The company reported earnings of $100,000 and distributed $40,000 in dividends during its first year. Also during the year, the company issued additional shares of stock for $75,000. What are the firm's liabilities at year end and the firm's contributed capital at the beginning of the year, respectively?

158. A __________________ involves comparing the changes in a firm's ratios over a multiple-year period.

159. Economic resources that have the potential or ability to provide future services or benefits to the firm are called _________________.

160. Which is NOT a current asset?

161. During the year, XYZ Company issued additional common stock. This transaction is an example of which of the following?

162. A creditor's claim on the resources of the company is called ____________.

163. The ________________ indicates the number of times that the average inventory has been sold during a particular period.

164. Which ratio provide a measure of the sales generated for each dollar invested in assets?

165. Which transactions does NOT result in an outflow of cash?

166. In the _____________, earnings per share amount are compared with the market price of the stock.

167. In computing the rate of return on common shareholders' equity, do dividends on preferred stock have to be added to net income?

168. The _______________ is the financial statement that presents the results of earnings activity over time.

169. Which ratio would probably NOT be used to analyze the Total Assets Turnover Ratio?

170. XYZ Company's retained earnings increased by $100,000 during the year. Also during the year, dividends totaling $22,500 were declared and paid to shareholders. What was XYZ Company's net income for the year?

171. The _____________ considers the availability of liquid assets to cover various levels of debt. For a financially healthy firm, the ratio should be 20 percent or more.

172. The _______________ represent/s the earnings, or profits, in excess of dividends distributed to shareholders that have been realized by the firm since its formation.

173. Which would NOT appear on an Income Statement?

174. Which of the following ratios measures the firm's performance in generating earnings that are assignable to the common shareholders' equity?

175. Which represent a measure of the assets provided by the original shareholder in exchange for an ownership interest in the firm?

176. Financial leverage can increase the return to common shareholders as long as ______________.

177. The Rate of Return on Assets can be disaggregated into two other ratios. Which is one of the two ratios?

178. A company wants to increase its rate of return on assets from 8 percent to 14 percent. It is believed that the firm's total assets turnover of .667 cannot be easily increased at the present time. What must the profit margin percentage be to achieve the desired 14 percent rate of return on assets?

179. The ______________ is the sequence of activities in which inventory is purchased on account from suppliers, inventory is sold on account to customers, customers pay the amounts due, and suppliers are paid the amounts due to them.

180. Outflows of assets used up in generating revenue are called ______________.

181. Financial statements that are prepared using a particular set of assumptions are called ___________________.

182. Which is NOT a measure of profitability?

183. Revenues are a measure of the inflows of assets (or reductions in liabilities) from selling goods and providing services to customers. Which is NOT a revenue transaction?

184. Which ratio use sales in its numerator?

185. The _______________ is used to indicate the relative protection of bondholders and to assess the probability of a firm's failing to meet required interest payments.

186. The _______________is supposed to indicate the ability of the firm to meet its current obligations.

187. Which is NOT a current liability?

188. XYZ Company reports total assets and total liabilities of $425,000 and $200,000, respectively, at the conclusion of its first year of business. The company earned $95,000 during the first year and distributed $50,000 in dividends. What was the firm's contributed capital?

189. In computing the rate of return on assets, interest expense net of income tax savings is added to net income. Assume that XYZ Company has interest expense of $20 million and net income of $50 million. Assume that the income tax rate is 40 percent. In computing the rate of return on assets, what would the numerator be?

190. Which would NOT be used to evaluate a firm's operating cycle?

191. The _____________ states that if bond indentures require periodic repayments of principal on long-term liabilities, the denominator of the interest coverage ratio might include such repayments.

192. Assume that the current ratio of XYZ Company is 2.5:1. What effect would an equal dollar increase in current assets and current liabilities have on the current ratio?

193. Which is NOT used to assess short-term liquidity risk?

194. Assume that the debt-equity ratio of XYZ Company is .5 to 1. If the company issued a long-term note in the purchase of some land, what effect would this transaction have on the debt-equity ratio?

195. The ________________ generally includes cash, marketable securities, and accounts receivable in its numerator.

196. ____________ is/are the excess of expenses over revenue for a given period.

197. Which ratio measure how many times Accounts Receivable is turned over during each period?

198. Which transaction does NOT result in an inflow of cash?

199. Property, plant, and equipment are categorized as ________.