Adventis FMC Level 1 2024 Exam| Questions
with Correct Answers| alreadt Passed
financial statement communicates what?- financial condition
- results of operations
- various other activities of an organization
how board of directors use financial data...- hold management accountable - make board-level
decisions about corporate strategy
how company management uses financial data...- measure performance
- make strategic, operating and financial decisions
how creditors use financial data...- measure creditworthiness
- liquidity
- bankruptcy risk
how investors use financial data...make decisions on buying/selling equity investments
how acquirers use financial data...- determine valuation
- make investment decisions
how regulators use financial data...determine whether company is operating according to
regulations/law
what does the income statement present?results of operations over a period of time
what is the purpose of the income statement?to show whether the company made or lost money
during the period reported
what does the income statement indicate?how revenues are translated into net income through
subtracting expenses
revenue (sales)amount charged for the delivery of goods or services
cost of sales (cogs)- direct cost of producing revenue
- Ex: raw materials, direct wages, etc.
gross profit- revenue - cogs
- indicates how efficiently labor and materials are used in the production process
operating expenses- all other expenses required to run a business
- Ex: management salaries, marketing, travel, etc.
, operating income (EBIT)- revenue - cogs - operating expenses
- indicates a company's earning power from ongoing operations
non-operating expenses- expenses not related to regular business of the company
- Ex: interest expense, restructuring expense, etc.
corporate taxeslocal and federal income taxes the company incurs
net income (net earnings)- revenue - cogs - operating expenses - non-operating expenses - taxes
- indicates increase in shareholders' value resulting from operations
what does the balance sheet show?an organization's financial position at a particular point in
time
what does the balance sheet disclose?- the resources an organization controls (assets)
- the claims on those resources (liabilities and equity)
what is the basic accounting equation?assets = liabilities + equity
what is the basic accounting equation a foundation for?the double entry bookkeeping system
what is the double entry bookkeeping system?there is a credit for every debit
what does the accrual accounting method measure?the performance of a company regardless of
when cash transaction occur
cashcurrent assets comprising currency or currency equivalents that can be accessed immediately
accounts receivableamount owed to an organization from the sale of a good or service
fixed assets- value of assets and property that can't be easily converted to cash
- has a useful life of greater than 1 year
- Ex: PPE
accounts payableamount owed to an organization's vendors
debtamount of obligations owed to creditors
equitycumulative shareholder investment + cumulative net income
what is working capital a measure of?- a company's efficiency
- short term financial health
working capital equationnon-cash current assets - non-debt current liabilities
what does a positive or negative working capital indicate?whether it's a source or use of cash
with Correct Answers| alreadt Passed
financial statement communicates what?- financial condition
- results of operations
- various other activities of an organization
how board of directors use financial data...- hold management accountable - make board-level
decisions about corporate strategy
how company management uses financial data...- measure performance
- make strategic, operating and financial decisions
how creditors use financial data...- measure creditworthiness
- liquidity
- bankruptcy risk
how investors use financial data...make decisions on buying/selling equity investments
how acquirers use financial data...- determine valuation
- make investment decisions
how regulators use financial data...determine whether company is operating according to
regulations/law
what does the income statement present?results of operations over a period of time
what is the purpose of the income statement?to show whether the company made or lost money
during the period reported
what does the income statement indicate?how revenues are translated into net income through
subtracting expenses
revenue (sales)amount charged for the delivery of goods or services
cost of sales (cogs)- direct cost of producing revenue
- Ex: raw materials, direct wages, etc.
gross profit- revenue - cogs
- indicates how efficiently labor and materials are used in the production process
operating expenses- all other expenses required to run a business
- Ex: management salaries, marketing, travel, etc.
, operating income (EBIT)- revenue - cogs - operating expenses
- indicates a company's earning power from ongoing operations
non-operating expenses- expenses not related to regular business of the company
- Ex: interest expense, restructuring expense, etc.
corporate taxeslocal and federal income taxes the company incurs
net income (net earnings)- revenue - cogs - operating expenses - non-operating expenses - taxes
- indicates increase in shareholders' value resulting from operations
what does the balance sheet show?an organization's financial position at a particular point in
time
what does the balance sheet disclose?- the resources an organization controls (assets)
- the claims on those resources (liabilities and equity)
what is the basic accounting equation?assets = liabilities + equity
what is the basic accounting equation a foundation for?the double entry bookkeeping system
what is the double entry bookkeeping system?there is a credit for every debit
what does the accrual accounting method measure?the performance of a company regardless of
when cash transaction occur
cashcurrent assets comprising currency or currency equivalents that can be accessed immediately
accounts receivableamount owed to an organization from the sale of a good or service
fixed assets- value of assets and property that can't be easily converted to cash
- has a useful life of greater than 1 year
- Ex: PPE
accounts payableamount owed to an organization's vendors
debtamount of obligations owed to creditors
equitycumulative shareholder investment + cumulative net income
what is working capital a measure of?- a company's efficiency
- short term financial health
working capital equationnon-cash current assets - non-debt current liabilities
what does a positive or negative working capital indicate?whether it's a source or use of cash
