,DOWNLOAD THE Test Bank for Financial Accounting Tools for BusinessDecis
m m m m m m m m m m
ion Making 9th Edition Kimmel
m m m m
CHAPTER 2 m
AmFURTHERmLOOKmATmFINANCIALmSTATEMENTS
CHAPTERmLEARNINGmOBJECTIVES
1. Identifymthemsectionsmofmamclassifiedmbalancemsheet.mInmam classifiedmbalancemsheet,m
companiesmclassifymassetsmasmcurrentmassets;mlong-
termminvestments;mproperty,mplant,mandmequipment;mandmintangibles.mTheymclassifymliabiliti
esmasmeithermcurrentmormlong-
term.mAmstockholders’mequitymsectionmshowsmcommonmstockmandmretainedmearnings.
2. Usemratiosmtomevaluatemamcompany’smprofitability,mliquidity,mandmsolvency.mRatioma
nalysismexpressesmthemrelationshipmamongmselectedmitemsmofmfinancialmstatementsmdata.m
Profitabilitymratios,msuchmasmearningsmpermsharem(EPS),mmeasuremaspectsmofmthemoperatin
gmsuccessmofmamcompanymformamgivenmperiodmofmtime.
Liquiditymratios,msuchmasmthemcurrentmratio,mmeasuremthemshort-
termmabilitymofmamcompanymtompaymitsmmaturingmobligationsmandmtommeetmunexpectedmnee
dsmformcash.mSolvencymratios,msuchmasmthemdebtmtomassetsmratio,mmeasuremthemabilitymofma
mcompanymtomsurvivemoverma mlongmperiod.
Freemcashmflowmindicatesmamcompany’smabilitymtomgeneratemcashmfrommoperationsmthatmis
msufficientmtompaymdebts,macquiremassets, mandmdistributemdividends.
3. Discussmfinancialmreportingmconcepts.mGenerallymacceptedmaccountingmprinciplesmarem
amsetmofmrulesmandmpracticesmrecognizedmasmamgeneralmguidemformfinancialmreportingmpurp
oses.mThembasicmobjectivemofmfinancialmreportingmismtomprovideminformationmthatmismuseful
mformdecision-mmaking.
Tombemjudgedmuseful,minformationmshouldmhavemthemprimarymcharacteristicsmofmrelevancem
andmfaithfulmrepresentation.mInmaddition,musefulminformationmismcomparable,mconsistent,mve
rifiable,mtimely,mandmunderstandable.
Themmonetarymunit massumptionmrequiresmthatmcompaniesmincludeminmthemaccountingmrecord
smonlymtransactionmdatamthatmcanmbemexpressedminmtermsmofm money.mThemeconomicmentity
massumptionmstatesmthatmeconomicm eventsmcanmbemidentifiedmwithmamparticularmunitmofmac
countability.mThemperiodicitymassumptionmstatesmthatmthemeconomicmlifemofmambusinessmca
nmbemdividedmintomartificialmtimemperiodsmandmthatmmeaningfulmaccountingmreportsmcanmbem
preparedmformeachmperiod.mThemgoing mconcernmassumptionmstatesmthatmthemcompanymwill
mcontinueminmoperationmlongmenoughmtomcarrymoutmitsmexistingmobjectivesmandmcommitment
s.
Themhistoricalmcostmprinciplemstatesmthatmthemcompaniesmshouldmrecordmassetsmatmtheirmco
st.mThemfairmvaluemprinciplemindicatesmthatmassetsmandmliabilitiesmshouldmbemreportedmatmfair
mvalue.mThemfullmdisclosuremprinciple mrequiresmthatmcompaniesmdisclosemcircumstances mand
meventsmthatmmattermtomfinancialmstatement musers.
Themcostmconstraintmweighsmthemcostmthatmcompaniesmincurmtomprovidemamtypemofminforma
tionmagainstmitsmbenefitmtomfinancialmstatementmusers.
FORmINSTRUCTORmUSEmONLY
mynursytest.store
,DOWNLOAD THE Test Bank for Financial Accounting Tools for BusinessDecis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
2-2 TestmBankmformFinancialmAccounting:mToolsmformBusinessmDecisionmMaking,mNinthmEdition
TRUE-FALSEmSTATEMENTS
1. Cashmandmsuppliesmarembothmclassifiedmasmcurrentmassets.
Ans:m T,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
2. Long-
termm investmentsm appearm inm them property,m plant,m andm equipmentm sectionm ofm the
mbalancemsheet.
Ans:m F,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
3. Amliabilitymismclassifiedmasmamcurrentmliabilitymifmitmismtombempaidmwithinmthemcomingmyear.
Ans:m T,m LO:m 1,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
4. Stockholders’mequitymismdividedmintomtwomparts:mcommonmstockmandmretainedmearnings.
Ans:m T,m LO:m 1,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
5. Itm ism possiblem form anm assetm tom bem am currentm assetm evenm thoughm them expectedm conv
ersionm ofmthatmassetmintomcashmismtombemlongermthanmonemyearmormthemnormalmoperatin
gmcycle.
Ans:mF,mLO:m1,mBloom:mC,m Difficulty:m Medium,mMin:m1,mAACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAm FC:mReporting,mAI
CPAmPC:mNone,mIMA:mReporting
6. Them investmentm categorym onm them balancem sheetm normallym includesm investmentsm th
atm aremintendedmtombemheldmformamshortmperiodmofmtimem(lessmthanmonemyear).
Ans:m F,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
7. Them mainm differencem betweenm intangiblem assetsm andm property,m plantm andm equipment
m ism themlengthmofmthemasset’smlife.
Ans:m F,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
8. Profitabilitymmeansmhavingmenoughmfundsmonmhandmtompaymdebtsmwhenmtheymfallmdue.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Medium,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Manag
ement,m Analysism andmManagement,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
9. Earningsm perm sharem ism calculatedm bym dividingm netm incomem minusm preferredm stockm div
idendsmformthemperiodmbymthemaveragemnumbermofmcommonmsharesmoutstandingmduring
mthemperiod.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mBusinessmEconomics
10. Earningsmpermsharemmeasuresmthemnetmincomemavailablemonmeachmsharemofmcommonmstock.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mBusinessmEconomics
11. Liquiditymratiosmmeasuremthemshort-
termmabilitymofmamcompanymtompaymitsmmaturingmobligationsmandmmeetmunexpectedmnee
dsmformcash.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
12. Solvencymratiosmmeasuremthemabilitymofmamcompanymtomsurvivemovermamshortmperiodmofmtime.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
FORmINSTRUCTORmUSEmONLY
mynursytest.store
, DOWNLOAD THE Test Bank for Financial Accounting Tools for BusinessDecis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
AmFurthermLookmatmFinancialmStateme 2-3
nts
13. Profitabilitymratiosmmeasuremthemoperatingmsuccessmofmamcompanymformamgivenmperiodmofmtime.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
14. Themcurrentmratiomismcomputedmasmcurrentmliabilitiesmdividedmbymcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mReporting
15. Themexcessmofmcurrentmassetsmovermcurrentmliabilitiesmismcalledmworkingmcapital.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
16. Themcurrentmratiomtakesmintomaccountmthemcompositionmofmcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:mBusinessmEconomics
17. Solvencymratiosmmeasuremthemshort-
termmabilitymofmthemcompanymtompaymitsmmaturingmobligations.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
18. Themdebtmtomassetsmratiommeasuresmthempercentagemofmassetsmfinancedmbymcreditors.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
19. Solvencym ism am company'sm abilitym tom paym interestm asm itm comesm duem andm tom repaym the
m balancemofmamdebtmduematmitsmmaturity.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Mana
gement,m Analysism andmManagement,mAICPAmPC:mProjectmManagement,mIMA:mBusinessmEconomics
20. Netmcashmprovidedmbymoperatingmactivitiesmtakesmintomaccountmthatmamcompanymmustmi
nvestminmcapitalmexpendituresmjustmtommaintainmitsmcurrentmlevelmofmoperations.
Ans:mF,mLO:m2,mBloom:m C,mDifficulty:mMedium,mMin:m1,m AACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAm FC:mReporting,m
AICPAm PC:mNone,mIMA:mBusinessmEconomics
21. Bothminvestorsmandmcreditorsmhavemanminterestminmamcompany’smabilitymtomgeneratemfa
vorablemcashmflows.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
22. Freemcashmflowmismnetmcashmprovidedmbymoperatingmactivitiesmlessmcapitalmexpenditures.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mReporting
23. Inm them statementm ofm cashm flows,m netm cashm providedm bym operatingm activitiesm indicat
esm themcash-generatingmcapabilitymofmthemcompany’smoperations.
Ans:m T,m LO:m 2,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:mReporting
24. Freemcashmflowmismnetmcashmprovidedmbymoperatingmactivitiesmlessmdividends.
Ans:mF,mLO:m2,mBloom:mK,mDifficulty:mEasy,mMin:m1,mAACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAmFC:mMeasurementmA
nalysismandmInterpretation,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
25. Long-termmcreditorsmconsidermamhighmfreemcashmflowmamountmanmindicationmofmsolvency.
Ans:m T,m LO:m 2,m Bloom:m C,m Difficulty:m Medium,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Man
agement,m Analysism andmManagement,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
FORmINSTRUCTORmUSEmONLY
mynursytest.store
m m m m m m m m m m
ion Making 9th Edition Kimmel
m m m m
CHAPTER 2 m
AmFURTHERmLOOKmATmFINANCIALmSTATEMENTS
CHAPTERmLEARNINGmOBJECTIVES
1. Identifymthemsectionsmofmamclassifiedmbalancemsheet.mInmam classifiedmbalancemsheet,m
companiesmclassifymassetsmasmcurrentmassets;mlong-
termminvestments;mproperty,mplant,mandmequipment;mandmintangibles.mTheymclassifymliabiliti
esmasmeithermcurrentmormlong-
term.mAmstockholders’mequitymsectionmshowsmcommonmstockmandmretainedmearnings.
2. Usemratiosmtomevaluatemamcompany’smprofitability,mliquidity,mandmsolvency.mRatioma
nalysismexpressesmthemrelationshipmamongmselectedmitemsmofmfinancialmstatementsmdata.m
Profitabilitymratios,msuchmasmearningsmpermsharem(EPS),mmeasuremaspectsmofmthemoperatin
gmsuccessmofmamcompanymformamgivenmperiodmofmtime.
Liquiditymratios,msuchmasmthemcurrentmratio,mmeasuremthemshort-
termmabilitymofmamcompanymtompaymitsmmaturingmobligationsmandmtommeetmunexpectedmnee
dsmformcash.mSolvencymratios,msuchmasmthemdebtmtomassetsmratio,mmeasuremthemabilitymofma
mcompanymtomsurvivemoverma mlongmperiod.
Freemcashmflowmindicatesmamcompany’smabilitymtomgeneratemcashmfrommoperationsmthatmis
msufficientmtompaymdebts,macquiremassets, mandmdistributemdividends.
3. Discussmfinancialmreportingmconcepts.mGenerallymacceptedmaccountingmprinciplesmarem
amsetmofmrulesmandmpracticesmrecognizedmasmamgeneralmguidemformfinancialmreportingmpurp
oses.mThembasicmobjectivemofmfinancialmreportingmismtomprovideminformationmthatmismuseful
mformdecision-mmaking.
Tombemjudgedmuseful,minformationmshouldmhavemthemprimarymcharacteristicsmofmrelevancem
andmfaithfulmrepresentation.mInmaddition,musefulminformationmismcomparable,mconsistent,mve
rifiable,mtimely,mandmunderstandable.
Themmonetarymunit massumptionmrequiresmthatmcompaniesmincludeminmthemaccountingmrecord
smonlymtransactionmdatamthatmcanmbemexpressedminmtermsmofm money.mThemeconomicmentity
massumptionmstatesmthatmeconomicm eventsmcanmbemidentifiedmwithmamparticularmunitmofmac
countability.mThemperiodicitymassumptionmstatesmthatmthemeconomicmlifemofmambusinessmca
nmbemdividedmintomartificialmtimemperiodsmandmthatmmeaningfulmaccountingmreportsmcanmbem
preparedmformeachmperiod.mThemgoing mconcernmassumptionmstatesmthatmthemcompanymwill
mcontinueminmoperationmlongmenoughmtomcarrymoutmitsmexistingmobjectivesmandmcommitment
s.
Themhistoricalmcostmprinciplemstatesmthatmthemcompaniesmshouldmrecordmassetsmatmtheirmco
st.mThemfairmvaluemprinciplemindicatesmthatmassetsmandmliabilitiesmshouldmbemreportedmatmfair
mvalue.mThemfullmdisclosuremprinciple mrequiresmthatmcompaniesmdisclosemcircumstances mand
meventsmthatmmattermtomfinancialmstatement musers.
Themcostmconstraintmweighsmthemcostmthatmcompaniesmincurmtomprovidemamtypemofminforma
tionmagainstmitsmbenefitmtomfinancialmstatementmusers.
FORmINSTRUCTORmUSEmONLY
mynursytest.store
,DOWNLOAD THE Test Bank for Financial Accounting Tools for BusinessDecis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
2-2 TestmBankmformFinancialmAccounting:mToolsmformBusinessmDecisionmMaking,mNinthmEdition
TRUE-FALSEmSTATEMENTS
1. Cashmandmsuppliesmarembothmclassifiedmasmcurrentmassets.
Ans:m T,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
2. Long-
termm investmentsm appearm inm them property,m plant,m andm equipmentm sectionm ofm the
mbalancemsheet.
Ans:m F,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
3. Amliabilitymismclassifiedmasmamcurrentmliabilitymifmitmismtombempaidmwithinmthemcomingmyear.
Ans:m T,m LO:m 1,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
4. Stockholders’mequitymismdividedmintomtwomparts:mcommonmstockmandmretainedmearnings.
Ans:m T,m LO:m 1,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
5. Itm ism possiblem form anm assetm tom bem am currentm assetm evenm thoughm them expectedm conv
ersionm ofmthatmassetmintomcashmismtombemlongermthanmonemyearmormthemnormalmoperatin
gmcycle.
Ans:mF,mLO:m1,mBloom:mC,m Difficulty:m Medium,mMin:m1,mAACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAm FC:mReporting,mAI
CPAmPC:mNone,mIMA:mReporting
6. Them investmentm categorym onm them balancem sheetm normallym includesm investmentsm th
atm aremintendedmtombemheldmformamshortmperiodmofmtimem(lessmthanmonemyear).
Ans:m F,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
7. Them mainm differencem betweenm intangiblem assetsm andm property,m plantm andm equipment
m ism themlengthmofmthemasset’smlife.
Ans:m F,m LO:m 1,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
8. Profitabilitymmeansmhavingmenoughmfundsmonmhandmtompaymdebtsmwhenmtheymfallmdue.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Medium,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Manag
ement,m Analysism andmManagement,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
9. Earningsm perm sharem ism calculatedm bym dividingm netm incomem minusm preferredm stockm div
idendsmformthemperiodmbymthemaveragemnumbermofmcommonmsharesmoutstandingmduring
mthemperiod.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mBusinessmEconomics
10. Earningsmpermsharemmeasuresmthemnetmincomemavailablemonmeachmsharemofmcommonmstock.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mBusinessmEconomics
11. Liquiditymratiosmmeasuremthemshort-
termmabilitymofmamcompanymtompaymitsmmaturingmobligationsmandmmeetmunexpectedmnee
dsmformcash.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
12. Solvencymratiosmmeasuremthemabilitymofmamcompanymtomsurvivemovermamshortmperiodmofmtime.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:mReporting
FORmINSTRUCTORmUSEmONLY
mynursytest.store
, DOWNLOAD THE Test Bank for Financial Accounting Tools for BusinessDecis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
AmFurthermLookmatmFinancialmStateme 2-3
nts
13. Profitabilitymratiosmmeasuremthemoperatingmsuccessmofmamcompanymformamgivenmperiodmofmtime.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
14. Themcurrentmratiomismcomputedmasmcurrentmliabilitiesmdividedmbymcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mReporting
15. Themexcessmofmcurrentmassetsmovermcurrentmliabilitiesmismcalledmworkingmcapital.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
16. Themcurrentmratiomtakesmintomaccountmthemcompositionmofmcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:mBusinessmEconomics
17. Solvencymratiosmmeasuremthemshort-
termmabilitymofmthemcompanymtompaymitsmmaturingmobligations.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
18. Themdebtmtomassetsmratiommeasuresmthempercentagemofmassetsmfinancedmbymcreditors.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mBusinessmEconomics
19. Solvencym ism am company'sm abilitym tom paym interestm asm itm comesm duem andm tom repaym the
m balancemofmamdebtmduematmitsmmaturity.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Mana
gement,m Analysism andmManagement,mAICPAmPC:mProjectmManagement,mIMA:mBusinessmEconomics
20. Netmcashmprovidedmbymoperatingmactivitiesmtakesmintomaccountmthatmamcompanymmustmi
nvestminmcapitalmexpendituresmjustmtommaintainmitsmcurrentmlevelmofmoperations.
Ans:mF,mLO:m2,mBloom:m C,mDifficulty:mMedium,mMin:m1,m AACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAm FC:mReporting,m
AICPAm PC:mNone,mIMA:mBusinessmEconomics
21. Bothminvestorsmandmcreditorsmhavemanminterestminmamcompany’smabilitymtomgeneratemfa
vorablemcashmflows.
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ICPAm PC:m None,m IMA:mBusinessmEconomics
22. Freemcashmflowmismnetmcashmprovidedmbymoperatingmactivitiesmlessmcapitalmexpenditures.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m A
ICPAm PC:m None,m IMA:mReporting
23. Inm them statementm ofm cashm flows,m netm cashm providedm bym operatingm activitiesm indicat
esm themcash-generatingmcapabilitymofmthemcompany’smoperations.
Ans:m T,m LO:m 2,m Bloom:m C,m Difficulty:m Easy,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:mReporting
24. Freemcashmflowmismnetmcashmprovidedmbymoperatingmactivitiesmlessmdividends.
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nalysismandmInterpretation,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
25. Long-termmcreditorsmconsidermamhighmfreemcashmflowmamountmanmindicationmofmsolvency.
Ans:m T,m LO:m 2,m Bloom:m C,m Difficulty:m Medium,m Min:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Man
agement,m Analysism andmManagement,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
FORmINSTRUCTORmUSEmONLY
mynursytest.store
