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Basic Financial Reporting MCQ

1. What purpose would a company's financial statements have for the lending institutions?

To generate the financial institutions' own financial reports

To determine whether to grant the company credit

To look for changes in payroll expense

To look for misuse of funds lent to the company

Answer

Correct Answer: To look for changes in payroll expense

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2. Which of the following errors/s can a trial balance be used to detect?

An incorrect amount entered as a debit, when the credit was entered correctly

An incorrect amount entered both as debit as well as credit

A missing transaction

A duplicate entry

Answer

Correct Answer: An incorrect amount entered as a debit, when the credit was entered correctly

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3. Which of these items would be shown separately on the income statement after the normal operations?

Detailed management salary schedule

Tax calculation

Discontinued operations

Detailed rent lease agreement schedule

Answer

Correct Answer: Discontinued operations

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4. How are the Statement of Retained Earnings & the Balance Sheet related?

Debts paid off in the current period are detailed in the Statement of RE

Statement of RE is a detailed analysis of the equity section and the change in it from the prior reported period

Cash from the balance sheet is transferred to the Statement of RE

They are not linked directly

Answer

Correct Answer: Statement of RE is a detailed analysis of the equity section and the change in it from the prior reported period

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5. A company prepays for 6 months of insurance. What effect does this have on their current assets?

No Change

Increase

Decrease

Varies depending on how they paid

Answer

Correct Answer: No Change

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6. Which of these does the operating section of a cash flow statement not contain?

Interest received on loans

Payments to suppliers

Dividends received from investments

Purchase of fixed assets

Answer

Correct Answer: Purchase of fixed assets

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7. Which of these are the two methods of preparing the cash flow statement?

Cash & Accrual

Direct & Indirect

Current Period & Prior Period

GAAP & International

Answer

Correct Answer: Direct & Indirect

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8. Which of these is a part of "Other Revenues"?

Sale of the company's products beyond the forecasted amount

Sale of all new products introduced that year

Any revenue items not generated as part of the primary operations of the company

Revenues generated from the sale of old inventory

Answer

Correct Answer: Any revenue items not generated as part of the primary operations of the company

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9. Which of the following would not be included in a balance sheet?

Accounts receivable

Accounts payable

Sales

Cash

Answer

Correct Answer: Sales

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10. Which of these are the four general groups of outside users of a company's financial reports?

Government, Charities, SEC, IRS

Investors, Lenders, Government, General Public

Accounting Standards Board, Charities, GAAP, Employees

Unions, Non Unions, Government Officials, SEC

Answer

Correct Answer: Investors, Lenders, Government, General Public

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11. Why would R&D be possibly included on both or either the Income Statement and Balance Sheet?

It depends what state the company is in and what the governing rules are

R&D can stand for different things, so it depends on how a company defines what is R&D

Companies can move it from statement to statement depending on what the most favorable result is

Some companies elect to capitalize their R&D over a certain amount, and expense smaller amounts

Answer

Correct Answer: Some companies elect to capitalize their R&D over a certain amount, and expense smaller amounts

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12. Which of the following would not appear on an income statement?

Cash

Payroll Expense

Income Tax

COGS

Answer

Correct Answer: Cash

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13. What number is transferred from the Income Statement to the Cash Flow statement?

Gross Sales

Net Income

Payroll Expense

Taxes

Answer

Correct Answer: Net Income

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14. Why would a company repurchase their own stock?

It is required to by the law after 1 year

To dilute the outstanding shares

To put cash in the stockholder's hands without issuing a dividend

To boost the share price

Answer

Correct Answer: To put cash in the stockholder's hands without issuing a dividend

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15. Which of these items would be accounted for as an expense?

Repayment of a bank loan

Dividends to stockholders

Purchase of land

Payment of the current period's rent

Answer

Correct Answer: Payment of the current period's rent

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16. Why would a company repurchase their own stock?

To reduce the market float at a time when the stock is undervalued in the market

To reduce the market float when prices are high

To increase the market float at a discount

To increase the market float at a premium, sending stocks higher

Answer

Correct Answer: To reduce the market float at a time when the stock is undervalued in the market

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17. Why would the general public be interested in a company's financial statements?

They might want early indications of management decisions

They work for or are considering working for the company

They are acting as a watch dog for the SEC

The IRS hires individuals to secretly audit company financial statements for fraud

Answer

Correct Answer: They work for or are considering working for the company

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18. Why would someone be interested in how the company used its cash?

Cash flow indicates profitability

Cash flow indicates how the company is managing its cash resources

The current cash flow statement indicates future profitability

It is a good detection method for fraud

Answer

Correct Answer: Cash flow indicates how the company is managing its cash resources

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19. Why is depreciation added back in the cash flow statement?

It is a substantial number which could skew the report if ignored

Companies handle depreciation differently so it is added back to neutralize any effects

It is non taxable

It is a transaction which will never impact cash and needs to be reversed out from its effect on net income

Answer

Correct Answer: It is a transaction which will never impact cash and needs to be reversed out from its effect on net income

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20. Why is the Statement of RE created?

To show the changes in Retained Earnings over a period of time

To show how the Retained Earnings balance at a specific time

To give the reader an idea of how much cash is reinvested in the company

It is a placeholder for tax liability

Answer

Correct Answer: To show the changes in Retained Earnings over a period of time

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21. Which is an example of a variable cost?

Management salaries

Utilities

Property taxes

Raw material

Depreciation

Answer

Correct Answer: Raw material

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22. With which of the following regulatory bodies would a publicly traded company be much more involved than a private company would be?

SEC

GAAP

IRS

FCC

Answer

Correct Answer: SEC

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23. Why do companies include notes along with the financial statements?

Without them no one would be able to use the numbers reported

So that the reader knows what type of inventory valuation method is being used

It is required by the IRS

To give the reader further insight into particular line items on a financial statement

Answer

Correct Answer: To give the reader further insight into particular line items on a financial statement

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24. What is the purpose of an audit?

To look for fraud

To make-work project for CPA's

To verify that statements made by the company are true based on an independent party's evaluation

To look for additional tax liability

Answer

Correct Answer: To verify that statements made by the company are true based on an independent party's evaluation

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25. Which of the following is a difference between a public company and a private one?

Public companies use different accounting software than private ones

Public companies will always have more employees than a private one

Only public companies can form corporations

Public companies must have audited financial statements and prepared SEC reports

Answer

Correct Answer: Public companies must have audited financial statements and prepared SEC reports

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26. Which is/are the primary financial statements used to measure stability?

Balance Sheet

Income Statement

Balance Sheet and Income Statement

Statement of Cash Flows and Income Statement

Answer

Correct Answer: Balance Sheet and Income Statement

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27. Retained earnings will change over time because of several factors. Which of the following factors would lead to an increase in the Retained Earnings?

Net loss

Net income

Dividends

Investments by stockholders

Answer

Correct Answer: Net income

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28. Pro forma statements are _______ statements.

actual

projected

previous years'

next years'

Answer

Correct Answer: projected

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29. Which of the following is not a fundamental of accounting?

Materiality

Timeliness

Matching

Magnitude

Answer

Correct Answer: Magnitude

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30. What is the purpose of the statement of cash flows?

To demonstrate how the company used their cash in the period reported

To show net income

To show how much cash the company collected in the period reported

To show outstanding loans and loan payments made

Answer

Correct Answer: To demonstrate how the company used their cash in the period reported

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31. How would the financial statements be useful for a Company Manager?

To decide whether to buy more stock or sell off the stock they own before financial reports become public

To compete against other departments for best sales

To make operational decisions based on comparing past and current results

To decide whether to double fixed assets in the next period

Answer

Correct Answer: To make operational decisions based on comparing past and current results

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32. By doing/issuing which of the following could a company raise short-term funds by selling receivables and inventory?

By factoring

By pledging inventory

By line of credit

By Notes

By term loan

Answer

Correct Answer: By factoring

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33. How are the income statement and balance sheet linked?

Cash from the balance sheet transfers to the income statement

They are not linked directly

All debt payments show on both the income statement and balance sheet

Net income from the income statement transfers to the balance sheet equity section

Answer

Correct Answer: Net income from the income statement transfers to the balance sheet equity section

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34. Which is the primary financial statement used to measure profitability?

Balance Sheet

Income Statement

Cash Flow Statement

None of the above

Answer

Correct Answer: Income Statement

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35. What is the one problem while comparing financial statements with companies based in different countries?

Countries use different accounting standards, comparisons can only be made directly with countries using GAAP

The exchange rate needs to be applied

Other countries do not audit their financial statements as thoroughly

Product lines are completely different making a comparison unusable

Answer

Correct Answer: Countries use different accounting standards, comparisons can only be made directly with countries using GAAP

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36. What way is government accounting different from public company accounting?

Government accounting has far more rules than public company accounting

Government accounting occurs only once per decade

The chart of accounts and financial statements are classified and organized differently

Governments trade their shares in a different market than Public companies and thus report differently

Answer

Correct Answer: The chart of accounts and financial statements are classified and organized differently

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37. What are the main categories of a balance sheet?

Sales, COGS, Operating Expenses, Net Income

Assets, Liabilities, Equity

Retained Earnings, Current Assets, Current Liabilities

Cash, Accounts Receivable, Fixed Assets, Long Term Assets

Answer

Correct Answer: Assets, Liabilities, Equity

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38. What does Treasury Stock appear on the balance sheet as?

As a reduction of opening Retained Earnings

As a positive entry in the equity section

As Dividends Paid

As a negative entry in the equity section

Answer

Correct Answer: As a negative entry in the equity section

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39. When a company files a statement of their financial plans for the next two years with the SEC, it is called a ______.

Market plan

Shelf registration

Stock plan

Statement of intent

Prospectus

Answer

Correct Answer: Statement of intent

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40. What is historical value?

Prices adjusted for inflation

The current sale value of an asset

The original cost or price paid for an asset

The average value of an asset

Answer

Correct Answer: The original cost or price paid for an asset

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41. How does Gross Income differ from Net Income?

Gross Income determines the company's cash flow, Net Income does not

Gross Income includes several fixed costs, Net Income does not

Gross Income includes all fixed costs, Net Income does not include any

Gross Income measures profitability before operating expenses, whereas Net Income is calculated after all operating expenses

Answer

Correct Answer: Gross Income measures profitability before operating expenses, whereas Net Income is calculated after all operating expenses

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42. What does the Balance Sheet reflect?

Net changes over a period of time

Only annual balances

Net Income over a period of 1 month

A specific point in time

Answer

Correct Answer: A specific point in time

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43. Which of the following transactions is a non cash event but would be disclosed in the notes of the Statement of Cash Flows?

Exchange of shares for cash

Investment of cash in exchange for a note receivable

Exchange of shares for an asset

Payment of accounts payable

Answer

Correct Answer: Exchange of shares for an asset

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44. Which of the following transactions would have no impact on the stockholder

Purchase of land from the proceeds of a bank loan

Dividends to stockholders

Net loss

Investments in cash by stockholders

Answer

Correct Answer: Purchase of land from the proceeds of a bank loan

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45. Which of the following does the cash flow cycle measure?

The time between purchase of raw materials and collection of cash

The time it takes to invest liquid funds

The time it takes for a check to get cleared in the bank

The maturity date of corporate bonds

The time between offering a marketable security and receiving funds from sale of one

Answer

Correct Answer: The time between purchase of raw materials and collection of cash

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46. Which of the following are the 3 main sections of Statement of Cash Flows?

Current, Long term, Near Term

Net Income, Gross Margin, Revenues

Assets, Liabilities, Equity

Operating, Investing, Financing

Answer

Correct Answer: Operating, Investing, Financing

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47. What is one possible use employees would have of the company financial statements?

It helps the unionized workers to determine their collective bargaining agreements

It helps the employees to buy shares of the company before a big news release hits

It helps the employees to demonstrate their own personal contribution to the company

It helps in creating human resource policies

Answer

Correct Answer: It helps the unionized workers to determine their collective bargaining agreements

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48. Which financial statement best allows a firm to assess its ability to pay dividends?

Statement of Cash Flows

Income Statement

Balance Sheet

Statement of Operations

Answer

Correct Answer: Income Statement

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49. What does GAAP stand for?

General Accounting Accrual Procedures

Generally Accepted Accounting Principles

Gap Accounts receivable Accounting Practices

General Accounting Accounts Payable

Answer

Correct Answer: Generally Accepted Accounting Principles

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50. The formula to calculate Ending Retained Earnings is ______.

Ending Retained Earnings = Cash + Current Assets - Fixed Assets

Ending Retained Earnings = Beginning RE - Investments - Dividends Paid + Net Income

Ending Retained Earnings = Investments + Dividends - Net Income

Ending Retained Earnings = Change in Accounts Receivable - Change in Accounts Payable

Answer

Correct Answer: Ending Retained Earnings = Beginning RE - Investments - Dividends Paid + Net Income

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51. How do investors turn the information on the financial statements into more useful data which is comparable to other companies?

Read all of the notes

Skip to the net income number, the only important number

Track cash balance

Perform financial analysis

Answer

Correct Answer: Perform financial analysis

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52. What is Treasury Stock?

Stock purchased by the U.S. Treasury Department

Stock repurchased by the issuing company, reducing the amount of stock outstanding in the open market

Stock purchased by the treasurer of the company for their personal portfolio

Stock not allowed to be purchased in the first 30 days after IPO

Answer

Correct Answer: Stock repurchased by the issuing company, reducing the amount of stock outstanding in the open market

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53. What are the four traits of a useful financial statement?

Material, Timely, Accurate, Cash Basis

Bi Weekly, Audited, Outsourced, Comparable

Relevant, Accurate, Cash Basis, Bi Weekly

Understandable, Relevant, Reliable, Comparable

Answer

Correct Answer: Understandable, Relevant, Reliable, Comparable

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54. How are the Cash Flow Statement and Balance Sheet related?

The ending cash balance on the Balance Sheet is transferred to the current period Cash Flow Statement

There is no relation

If the cash flow statement is prepared, the balance sheet does not have to show cash

Ending cash balance from the Cash Flow Statement is transferred to the Balance Sheet

Answer

Correct Answer: Ending cash balance from the Cash Flow Statement is transferred to the Balance Sheet

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55. What is another name for the Balance Sheet?

Income Statement

Statement of Income

Cash Inflows & Outflows

Statement of Financial Position

Answer

Correct Answer: Statement of Financial Position

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56. Financial managers use the _____________ to plan for monthly financing needs.

capital budget

cash budget

pro forma

income statement

Answer

Correct Answer: cash budget

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57. What purpose would a company's financial statements have for the lending institutions?

To determine if management is too top heavy

To change a company's agreed upon interest rate without telling them

To look for a reason to break a loan agreement

To determine if the company is meeting current covenants in their existing debt agreement

Answer

Correct Answer: To determine if the company is meeting current covenants in their existing debt agreement

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58. The best financial report to see a company's cash balance is ______.

Balance Sheet

Income Statement

Margin Analysis

Answer

Correct Answer: Balance Sheet

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59. What is the purpose of a trial balance?

To act as a worksheet, making sure all debits equal all credits, as well as aid in the discovery of issues

To be shown to the public along with all other financial statements

To determine if cash reserves are adequate

To demonstrate to management the profitability of the company

Answer

Correct Answer: To act as a worksheet, making sure all debits equal all credits, as well as aid in the discovery of issues

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60. A company pays out a previous declared common stock dividend. What is its effect on the cash?

It will decrease

It will increase

There would be no change

It depends on the dividend date

Answer

Correct Answer: It will decrease

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61. What is the primary reason a government entity would want to look at a company's financial statements?

To look whether ethical standards meeting expectations

To determine if the company is committing tax fraud or evasion

To determine if a company has an offshore bank account

To determine tax liability

Answer

Correct Answer: To determine tax liability

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62. How are the Cash Flow Statement and Balance Sheet related?

Changes in Accounts Receivable and Accounts Payable are reflected on the Cash Flow Statement

Accounts Receivable is determined by analyzing the Cash Flow statement

Ending Inventory is calculated using the Cash Flow statement

They are not linked directly

Answer

Correct Answer: Changes in Accounts Receivable and Accounts Payable are reflected on the Cash Flow Statement

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63. A company declares a dividend. What is its effect on the cash?

It increases Cash

It decreases Cash

There is no change

It depends on the dividend date

Answer

Correct Answer: There is no change

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64. Which of the following does Financing Activities not include?

Payments to vendors

Payments of dividends to company shareholders

Payments to repurchase company shares

Repayment of debt

Answer

Correct Answer: Payments to vendors

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65. Which of the following is not a part of cost of goods sold?

Raw material

Labor

Capital

All of the above are part of cost of goods sold

Answer

Correct Answer: Capital

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66. In what general way do investors use the information in the financial statements?

To determine if a company is worth investing in

To determine if a company is too top heavy with management

To look for irregularities and report them to the authorities

To look for insider trading

Answer

Correct Answer: To determine if a company is worth investing in

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67. How does the income statement of a charity differ from that of a public company?

Charities typically have higher overhead expenses such as management wages

Charities produce a similar report which shows funding sources, and program expenses and other commitments

Charities do not generate cash via a revenue model, and do not produce any statements

Charities report each donation as taxable income

Answer

Correct Answer: Charities produce a similar report which shows funding sources, and program expenses and other commitments

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68. What is one procedure a Company Manager would take to make the information on financial reports more useful for examination?

Hire an auditor to validate the company reports

Use the information on the financial reports to do a financial analysis, creating comparable ratios

Compare it to other companies

Change the statement of cash flows to be the direct method

Answer

Correct Answer: Use the information on the financial reports to do a financial analysis, creating comparable ratios

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69. How often do companies typically generate standard financial reports?

Yearly

Quarterly

Monthly

Daily

Answer

Correct Answer: Monthly

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70. How does Treasury Stock differ from Trading Stock?

Treasury stock is an indication that a company is failing

Treasury stock has no voting or dividend rights

Treasury stock is looked negatively upon by the investment community

Treasury stock can be resold to employees at a discount

Answer

Correct Answer: Treasury stock has no voting or dividend rights

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71. Which cash collection technique is the most cost-effective for companies with many locations?

Self-addressed stamped envelopes

Centralized collection system

Lockbox system

Using a post office box

Regional collection offices

Answer

Correct Answer: Lockbox system

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72. What does the indirect method of preparing the cash flow statement effectively accomplish?

It keeps the use of cash vague so the reader cannot tell the exact use

It is a less detailed summary version of use of cash

It shows the reader how well the management is performing

It takes the accrual basis of accounting and converts it to cash basis

Answer

Correct Answer: It takes the accrual basis of accounting and converts it to cash basis

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73. True or False? Financial reporting is not needed by small companies listed on the OTC bulletin board.

True

False

Answer

Correct Answer: True

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74. True or False? The SEC and FASB have similar duties.

True

False

Answer

Correct Answer: True

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75. True or False? Net operating gains are added to net income when calculating a cash flows operating activity?

False

True

Answer

Correct Answer: False

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76. The DuPont Analysis measures breaks down the Return of Equity into how many parts?

Answer

Correct Answer: 5

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77. Return on Asset = Net income / Sales * ?

Net income / Total assets

Total Assets / Sales

Sales * Total Assets

Sales / Total Assets

Answer

Correct Answer: Sales / Total Assets

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78. A decrease in non-current assets is _________ net income.

subtracted from

added to

multiplied by

divided by

Answer

Correct Answer: added to

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79. Which of the following are not considered financial reports?

press releases

SEC filings

3rd party analysis

auditor's reports

Answer

Correct Answer: 3rd party analysis

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80. Operational efficiency is measured by which part of the DuPont ratio?

equity multiplier

Profit margin

Asset turnover

Answer

Correct Answer: Asset turnover

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81. How do you calculate goodwill?

total assets - total equity

total assets - total liabilities

total liabilities - total assets

total liabilities - total equity

Answer

Correct Answer: total assets - total liabilities

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82. The financial crisis of 2008 led to more

(None of these)

transparency

bankruptcies

(All of these)

Answer

Correct Answer: (All of these)

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83. What do you obtain from this expression: (Earnings After Tax / Net Profit After Tax) - Payable Dividends

Retained Earnings

Diluted Equity

Diluted Earnings

Equity

Answer

Correct Answer: Retained Earnings

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84. True or False? There are three basic types of accounting models?

True

False

Answer

Correct Answer: True

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85. In 2001, the International Accounting Standards Board (IASB) took over from what prior organization?

International Accounting Standards Committee

International Financial Reporting Standards

International Account Standards

Financial Reporting Board

Answer

Correct Answer: International Accounting Standards Committee

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86. A 10Q is a financial report for a company that is given

two times a year

once a year

four times a year

once a month

Answer

Correct Answer: four times a year

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87. True or False? Earnings per share do not include taxes for the year.

False

True

Answer

Correct Answer: False

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88. Earnings per share = ?

(Preferred Stock Dividends - Net Income) / (Weighted Average of Common Stock Shares Outstanding)

(Net Income - Preferred Stock Dividends) / (Weighted Average of Common Stock Shares Outstanding)

(Net Income - Preferred Stock Dividends) / (Common Stock Shares Outstanding)

(Preferred Stock Dividends - Net Income) / (Common Stock Shares Outstanding)

Answer

Correct Answer: (Net Income - Preferred Stock Dividends) / (Weighted Average of Common Stock Shares Outstanding)

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89. Current Dividend Yield = ?

(Full Year Dividend) / (Current Share Price)

(Average Market Share Price) / (Full Year Dividend)

(Current Share Price) / (Full Year Dividend)

(Full Year Dividend) / (Average Market Share Price)

Answer

Correct Answer: (Full Year Dividend) / (Current Share Price)

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90. If the price per share of a company is $10 and and its EPS is $1, then what is its PE ratio?

(None of these)

100

0.1

Answer

Correct Answer: 10

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91. The cost principle is:

when a company will record its revenue

when a company must disclose all pertininant information in regards to the financial statement which would affect an investors decision

that a company must declare its expenses and revenues together in the same period

when the cost of something matches the accounting information on the balance sheet

Answer

Correct Answer: when the cost of something matches the accounting information on the balance sheet

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92. The revenue recognition principle is:

when a company will record its revenue

when a company must disclose all pertinent information in regards to the financial statement which would affect an investors decision

when the cost of something matches up with the accounting information on the balance sheet

that a company must declare its expenses and revenues together in the same period

Answer

Correct Answer: when a company will record its revenue

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93. The SEC usually deals with:

(All of these)

(None of these)

public companies

private companies

Answer

Correct Answer: public companies

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94. Which of the following is a general purpose financial report

investor reports

shareholder reports

annual reports

(All of these)

Answer

Correct Answer: (All of these)

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95. Which form corresponds to an annual summary?

10Q

10k

Answer

Correct Answer: 10k

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96. True or False? Dividends appear on the income statement.

True

False

Answer

Correct Answer: False

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97. How do you calculate market capitalization?

Number of shares outstanding / share price

Share price * total assets

Number of shares outstanding * share price

Share price / Number of shares outstanding

Answer

Correct Answer: Number of shares outstanding * share price

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98. True or False? A form 8k is used to notify investors of some meaningful event arising.

False

True

Answer

Correct Answer: True

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99. True or False: The asset turnover ratio measure the firm's efficient use of its liabilities in generating sales income?

False

True

Answer

Correct Answer: False

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100. True or False? The notes to financial statements are additional information that is added to the beginning of the financial statements

False

True

Answer

Correct Answer: False

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101. What does the I stand for in EBITDA?

Income

Intangible

Interest

Increase

Answer

Correct Answer: Interest

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102. Nowadays most financial statements can be found on

(All of these)

yahoo finance pages

google finance pages

the SEC website

Answer

Correct Answer: (All of these)

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103. 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

Answer

Correct Answer: True

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104. The matching principle is:

when a company must disclose all pertininant information in regards to the financial statement which would affect an investor's decision

when a company will record its revenue

when the cost of something matches up with the accounting information on the balance sheet

that a company must declare its expenses and revenues together in the same period

Answer

Correct Answer: that a company must declare its expenses and revenues together in the same period

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105. A firm with a low profit margin indicates __________________?

a higher risk that a decline 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 lower risk that an increase in sales will erase profits and result in net loss

Answer

Correct Answer: a higher risk that a decline in sales will erase profits and result in net loss

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106. Net profit margin =

Net Profit * Expenses

Net Profit / Revenue

Net Profit * Margin

Net Profit / Expenses

Answer

Correct Answer: Net Profit / Revenue

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107. Revenue - Expenses = what?

Net income

Cost of Sales

Gross Revenue

Sales Revenue

Answer

Correct Answer: Net income

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108. Which is the correct accounting equation?

net worth - asset = liabilities

asset - net worth = liabilities

assets - liabilities = net worth

liabilities - net worth = asset

Answer

Correct Answer: assets - liabilities = net worth

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109. An example of a financial report is a:

10Q

20R

14J

17U

Answer

Correct Answer: 10Q

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110. What was the purpose of the Sarbanes-Oxley Act of 2002?

lower taxes on larger corporations

(None of these)

raise taxes on larger corporations

decrease fraudulent activity of businesses

Answer

Correct Answer: decrease fraudulent activity of businesses

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111. True or false? Operating margin is a good tool when deciding to invest in a company.

False

True

Answer

Correct Answer: True

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112. True or False? Only businesses use financial reports.

False

True

Answer

Correct Answer: False

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113. If a firm's payout ratio is greater than 1, the firm is __________?

paying less dividends out than they earned

paying more dividends out than they earned

not paying out any dividends

Answer

Correct Answer: paying more dividends out than they earned

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114. Which activity is represented first in the Cash Flow Statements?

Operating

Investing

Purchasing

Financing

Answer

Correct Answer: Operating

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115. The cash flow statement details a firm's _________?

efficiency

liquidity

profitability

Answer

Correct Answer: liquidity

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116. When are current liabilities due?

Within 6 months

After one year

Within 3 months

Within one year

Answer

Correct Answer: Within one year

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117. Accrual Basis Accounting matches what?

Revenues and Expenses

Cash and Expenses

Cash

Cash and Revenues

Answer

Correct Answer: Revenues and Expenses

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118. What does it mean if a company has a negative EPS?

The company is losing money

The company is making money

Cannot happen

Answer

Correct Answer: The company is losing money

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119. True of False? Financial statements need to be audited.

True

False

Answer

Correct Answer: True

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120. The full disclosure principle indicates...

a company must disclose all pertininant information in regards to the financial statement which would affect an investor's decision

when the cost of something matches up with the accounting information on the balance sheet

when a company will record its revenue

that a company must declare its expenses and revenues together in the same period

Answer

Correct Answer: a company must disclose all pertininant information in regards to the financial statement which would affect an investor's decision

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121. An example of an SEC filing is a:

17U

10K

14J

10Z

Answer

Correct Answer: 10K

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122. What are the three parts of a firm's balance sheet?

Assets, Liabilities, Equity

Loss, Profits, Equity

Assets, Loss, Profit

Liabilities, Equity, Profit

Answer

Correct Answer: Assets, Liabilities, Equity

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123. An item needed for financial reporting is:

cash flow statement

(All of these)

a balance sheet

income statement

Answer

Correct Answer: (All of these)

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124. True or False? ROA stands for Return on Asset.

False

True

Answer

Correct Answer: True

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125. True or False? Financial reports are not important in making investment decisions.

True

False

Answer

Correct Answer: False

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126. True or False? The balance sheet is a snapshot of a firm's financial position.

True

False

Answer

Correct Answer: True

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127. The GAAP is comprised of:

matching principle

cost principle

revenue recognition principle

(All of these)

Answer

Correct Answer: (All of these)

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128. Which of the following is an example of a non-current asset?

Prepaid expenses

Cash

Property

Accounts receivable

Answer

Correct Answer: Property

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129. Financial reports are used to find:

EPS

PEG ratio

(All of these)

PE ratio

Answer

Correct Answer: (All of these)

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130. True or False? Financial reporting is a financial statement that is a proper documentation of the financial activities of a business.

False

True

Answer

Correct Answer: True

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131. If a bond is trading at par, what is its face value?

101

100

102

Answer

Correct Answer: 100

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132. The balance sheet is also referred to as what?

Profit & Loss Report

Statement of Revenue & Expense

Statement of Financial Position

Statement of Comprehensive Income

Answer

Correct Answer: Statement of Financial Position

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133. Which of the following is a current asset?

Accounts Receivable

Equipment

Property

Intangible Assets

Answer

Correct Answer: Accounts Receivable

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134. The Three Parts of the Cash Flow Statements include Operating, Investing and ______?

Financing

Purchasing

Borrowing

Amoritizating

Answer

Correct Answer: Financing

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135. True or False? A personal financial statement is useful when trying to obtain a loan.

True

False

Answer

Correct Answer: True

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136. True or False? A cash flow statement shows only the inflows of cash into the company.

False

True

Answer

Correct Answer: False

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137. The balance sheet reports a company's assets, liabilities and what?

Expense

Profits

Ownership Equity

Revenue

Answer

Correct Answer: Ownership Equity

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138. 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

Answer

Correct Answer: the firm should invest in the project

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139. True or False? Creditors use financial reports to make decisions on loans.

False

True

Answer

Correct Answer: True

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140. What does the SEC stand for?

Security Exchange Commission

Security Entitlement Commission

Standard Exchange Commission

Answer

Correct Answer: Security Exchange Commission

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141. The general formula for a balance sheet is

Assets = Liabilities * Equity

Assets = Liabilities + Equity

Assets = Liabilities / Equity

Assets = Liabilities - Equity

Answer

Correct Answer: Assets = Liabilities + Equity

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142. The single step income statement approach totals revenues and subtracts ________?

Expenses

Assets

Equity

Liabilities

Answer

Correct Answer: Expenses

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143. True or False? The diluted earnings per share is a more reliable way to measure earnings per share.

True

False

Answer

Correct Answer: True

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144. Who typically needs to approve a financial statement when they are a SEC filing?

accountant

(None of these)

lawyer

employee

Answer

Correct Answer: accountant

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145. A balance sheet typically has:

equity

liabilties

assets

(All of these)

Answer

Correct Answer: (All of these)

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Financial Reporting MCQs | Topic-wise

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