ACCT 5315 Exam 1/Midterm Prep | questions and
Answers
Which of the following items would not be found on a balance sheet? (Select all that
apply)
Property, plant and equipment
Cost of Goods Sold
Stockholders' Equity
Sales
Nonowner financing ** Answ** Cost of Goods Sold
Sales
Which of the following are relevant in an analysis of a company's business
environment?
Financing
Labor
Buyers
Governance
All of the above ** Answ** All of the above
Which of the following groups would likely not be interested in the financial statements
of a large public company such as Berkshire Hathaway?
Shareholders
,Employees
Competitors
Taxing agencies
None of the above ** Answ** None of the above
The ratio of net income to equity is also known as:
Total net equity ratio
Profit margin
Return on equity
Net income ratio
None of the above ** Answ** Return on equity
A company's net cash flow will equal its net income ...
Almost always
Rarely
Occasionally
Only when the company has no investing cash flow for the period
Only when the company has no investing or financing cash flow for the period **
Answ** Rarely
,A company's return on assets (ROA) can be disaggregated to reveal which of the
following: (Select all that apply)
Financial leverage
Asset turnover
Sales growth
Profit margin
Asset growth ** Answ** Asset Turnover
Profit Margin
Consider two companies (A and B) with equal ROA's of 15%. Company A has an asset
turnover of 1.2 and Company B has an asset turnover of 1.5. If all else is equal,
Company B with its higher asset turnover, is less profitable because it is expensive to
turn assets over.
True
False ** Answ** true
Shareholders demand financial information primarily to assess profitability and risk
whereas bankers demand information primarily to assess cash flows to repay loan
interest and principal.
True
False ** Answ** Answer: True
Rationale: While both shareholders and bankers are interested in all the information
companies provide, shareholders care about more about a company's profitability and
bankers care more about solvency and creditworthiness.
Publicly traded companies must provide to the Securities Exchange Commission annual
audited financial statements (10K reports) and quarterly audited financial statements
(10Q reports).
True
False ** Answ** False
, Quarterly reports do not need to be audited
An increase in treasury stock would be reflected in the statement of stockholders'
equity.
True
False ** Answ** True
Return on Assets (ROA) measures the profit the company makes on each dollar of total
assets it uses.
True
False ** Answ** True
Assets must always equal liabilities plus equity.
True
False ** Answ** true
Publicly traded companies are required to provide quarterly financial reports directly to
the public.
True
False ** Answ** false
Return on Assets (ROA) = Net Income / Sales × Asset Turnover
True
False ** Answ** True
For self-constructed assets, a firm may capitalize any expenses required to place the
asset in service. This includes any interest expense on loans during the construction
period.
True
False ** Answ** True
When a firm uses an accelerated method of depreciation for tax reporting in order to
minimize its tax burden, it will not really save any tax dollars in the end because
Answers
Which of the following items would not be found on a balance sheet? (Select all that
apply)
Property, plant and equipment
Cost of Goods Sold
Stockholders' Equity
Sales
Nonowner financing ** Answ** Cost of Goods Sold
Sales
Which of the following are relevant in an analysis of a company's business
environment?
Financing
Labor
Buyers
Governance
All of the above ** Answ** All of the above
Which of the following groups would likely not be interested in the financial statements
of a large public company such as Berkshire Hathaway?
Shareholders
,Employees
Competitors
Taxing agencies
None of the above ** Answ** None of the above
The ratio of net income to equity is also known as:
Total net equity ratio
Profit margin
Return on equity
Net income ratio
None of the above ** Answ** Return on equity
A company's net cash flow will equal its net income ...
Almost always
Rarely
Occasionally
Only when the company has no investing cash flow for the period
Only when the company has no investing or financing cash flow for the period **
Answ** Rarely
,A company's return on assets (ROA) can be disaggregated to reveal which of the
following: (Select all that apply)
Financial leverage
Asset turnover
Sales growth
Profit margin
Asset growth ** Answ** Asset Turnover
Profit Margin
Consider two companies (A and B) with equal ROA's of 15%. Company A has an asset
turnover of 1.2 and Company B has an asset turnover of 1.5. If all else is equal,
Company B with its higher asset turnover, is less profitable because it is expensive to
turn assets over.
True
False ** Answ** true
Shareholders demand financial information primarily to assess profitability and risk
whereas bankers demand information primarily to assess cash flows to repay loan
interest and principal.
True
False ** Answ** Answer: True
Rationale: While both shareholders and bankers are interested in all the information
companies provide, shareholders care about more about a company's profitability and
bankers care more about solvency and creditworthiness.
Publicly traded companies must provide to the Securities Exchange Commission annual
audited financial statements (10K reports) and quarterly audited financial statements
(10Q reports).
True
False ** Answ** False
, Quarterly reports do not need to be audited
An increase in treasury stock would be reflected in the statement of stockholders'
equity.
True
False ** Answ** True
Return on Assets (ROA) measures the profit the company makes on each dollar of total
assets it uses.
True
False ** Answ** True
Assets must always equal liabilities plus equity.
True
False ** Answ** true
Publicly traded companies are required to provide quarterly financial reports directly to
the public.
True
False ** Answ** false
Return on Assets (ROA) = Net Income / Sales × Asset Turnover
True
False ** Answ** True
For self-constructed assets, a firm may capitalize any expenses required to place the
asset in service. This includes any interest expense on loans during the construction
period.
True
False ** Answ** True
When a firm uses an accelerated method of depreciation for tax reporting in order to
minimize its tax burden, it will not really save any tax dollars in the end because
