,DOWNLOAD THE Test Bank for Financial Accounting Tools for Business Decis
m m m m m m m m m m
ion Making 9th Edition Kimmel
m m m m
CHAPTER 2 m
AmFURTHER mLOOK mAT mFINANCIALmSTATEMENTS
CHAPTERmLEARNINGmOBJECTIVES
1. Identifymthemsectionsmof mamclassified mbalancem sheet.mIn mamclassified mbalancemsheet,m
companies mclassify massets masmcurrentmassets;mlong-
termminvestments;mproperty,mplant,mand mequipment;mand mintangibles.mThey mclassifymliabiliti
es mas meither mcurrentmor mlong-
term.mAmstockholders’mequity msection mshows mcommon mstock mand mretained mearnings.
2. Usemratios mtomevaluatem amcompany’s mprofitability,mliquidity,mandm solvency. mRatio ma
nalysis mexpresses mthemrelationship mamong mselected mitems mofmfinancial mstatements mdata.m
Profitability mratios,msuchmas mearnings mper msharem(EPS),mmeasuremaspects mofmthemoperatin
g msuccess mofmamcompany mfor mamgiven mperiod mofmtime.
Liquidity mratios,msuch mas mthemcurrentmratio,mmeasuremthemshort-
termmability mofmamcompany mto mpay mits mmaturing mobligations mand mto mmeetmunexpected mnee
dsmfor mcash.mSolvencymratios,msuch mas mthemdebtmto massetsmratio,mmeasuremthemabilitymofm
amcompany mto msurvivemover mamlong mperiod.
Freemcashmflowmindicates mamcompany’s mability mto mgeneratemcash mfrommoperations mthatmis
msufficientmto mpay mdebts,macquiremassets,mand mdistributemdividends.
3. Discussmfinancialmrepo rting mconcepts.mGenerally maccepted maccounting mprinciples marem
amsetmofmrules mand mpracticesmrecognized mas mamgeneral mguidemfor mfinancial mreporting mpurp
oses.mThembasic mobjectivemofmfinancial mreporting mis mto mprovideminformation mthatmismuseful
mfor mdecision- mmaking.
To mbemjudged museful,minformation mshould mhavemthemprimarymcharacteristics mofmrelevancem
and mfaithfulmrepresentation.mIn maddition,museful minformation mis mcomparable,mconsistent,mve
rifiable,mtimely,mand munderstandable.
Themmonetary munit massumptionmrequires mthatmcompanies mincludemin mthemaccounting mrecord
s monly mtransaction mdatamthatmcan mbemexpressed min mterms mofmmoney.mThemeconomic mentit
y massumptionmstates mthatmeconomic meventsmcanmbemidentified mwith mamparticular munitmofma
ccountability.mThemperiodicity massumptionmstates mthatmthemeconomic mlifemofmambusinessmca
n mbemdivided mintomartificial mtimemperiods mandmthatmmeaningful maccounting mreports mcan mbe
mprepared mformeach mperiod.mThemgoingmconcernmassumptionmstates mthatmthemcompany mwil
l mcontinuemin moperation mlong menough mto mcarry moutmits mexisting mobjectives mand mcommitme
nts.
Themhistorical mcostmprinciplemstates mthatmthemcompanies mshould mrecord massets matmtheirmco
st.mThemfairmvaluemprinciplemindicatesmthatmassetsmandmliabilitiesmshould mbemreportedmatmfai
r mvalue.mThemfullmdisclosuremprinciple mrequires mthatmcompanies mdisclosemcircumstances man
d mevents mthatmmatter mto mfinancial mstatementmusers.
Themcostmconstraintmweighs mthemcostmthatmcompanies mincur mto mprovidemamtypemofminforma
tion magainstmits mbenefitmto mfinancial mstatementmusers.
FORmINSTRUCTORmUSE mONLY
mynursytest.store
,DOWNLOAD THE Test Bank for Financial Accounting Tools for Business Decis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
2-2 TestmBankmformFinancialmAccounting: mToolsmformBusinessmDecision mMaking,mNinth mEdition
TRUE-FALSEmSTATEMENTS
1. Cash mand msupplies maremboth mclassified mas mcurrentmassets.
Ans:m T,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
2. Long-
termm investments m appear m inm them property,m plant,m andm equipmentm sectionm ofm the
mbalancemsheet.
Ans:m F,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
3. Amliability mis mclassified mas mamcurrentmliability mifmitmis mto mbempaid mwithin mthemcoming myear.
Ans:m T,m LO:m 1,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
4. Stockholders’mequity mis mdivided minto mtwo mparts:mcommon mstock mand mretained mearnings.
Ans:m T,m LO:m 1,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
5. Itmis mpossiblemfor manmassetmtombemamcurrentmassetmeven mthoughmthemexpected mconver
sion mofmthatmassetminto mcashmismtombemlonger mthanmonemyear mormthemnormal moperating
mcycle.
Ans:mF,mLO:m1,mBloom:mC,mDifficulty:mMedium,mMin:m1,mAACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAmFC:mReporting,mAIC
PAmPC:mNone,mIMA:m Reporting
6. Them investmentm category m onm them balancem sheetm normallym includes m investments m th
atm aremintended mto mbemheld mfor mamshortmperiod mofmtimem(less mthan monemyear).
Ans:m F,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
7. Themmain mdifferencembetween mintangiblemassets mandmproperty,mplantmandmequipmentmi
s mthemlength mofmthemasset’s mlife.
Ans:m F,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
8. Profitability mmeans mhaving menough mfunds mon mhand mto mpay mdebts mwhen mthey mfall mdue.
Ans:m F,m LO:m 2,m Bloom:mK,mDifficulty:mMedium,m Min:m1,m AACSB:m None,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m RiskmManag
ement,m Analysism andm Management,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
9. Earnings mper msharemis mcalculatedmby mdividingmnetmincomemminus mpreferredmstockmdivi
dends mformthemperiodmbymthemaveragemnumber mofmcommonmshares moutstanding mdurin
g mthemperiod.
Ans:m T,m LO:m 2,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m BusinessmEconomics
10. Earnings mper msharemmeasures mthemnetmincomemavailablemon meach msharemofmcommon mstock.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m BusinessmEconomics
11. Liquidity mratios mmeasuremthemshort-
termmability mofmamcompanymto mpaymits mmaturing mobligations mandmmeetmunexpected mnee
ds mfor mcash.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
12. Solvency mratios mmeasuremthemability mofmamcompany mto msurvivemover mamshortmperiod mofmtime.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
FORmINSTRUCTORmUSE mONLY
mynursytest.store
, DOWNLOAD THE Test Bank for Financial Accounting Tools for Business Decis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
A mFurthermLookmatmFinancialmStateme 2-3
nts
13. Profitability mratios mmeasuremthemoperating msuccess mofmamcompany mfor mamgiven mperiod mofmtime.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
14. Themcurrentmratio mis mcomputed mas mcurrentmliabilities mdivided mby mcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m Reporting
15. Themexcess mofmcurrentmassets mover mcurrentmliabilities mis mcalled mworking mcapital.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
16. Themcurrentmratio mtakes minto maccountmthemcomposition mofmcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
17. Solvency m ratios m measurem them short-
termm ability m ofm them company m to m pay m its m maturing mobligations.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
18. Themdebtmto massets mratio mmeasures mthempercentagemofmassets mfinanced mby mcreditors.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
19. Solvency mismamcompany'smability mtompay minterestmas mitmcomes mduemand mto mrepay mthem
balancemofmamdebtmduematmits mmaturity.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,mMin:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Man
agement,m Analysism andm Management,mAICPAmPC:mProjectmManagement,mIMA:mBusinessmEconomics
20. Netmcash mprovided mby moperating mactivities mtakes mintomaccountmthatmamcompany mmustmi
nvestmin mcapital mexpenditures mjustmto mmaintain mits mcurrentmlevel mofmoperations.
Ans:mF,mLO:m2,mBloom:mC,mDifficulty:mMedium,mMin:m1,mAACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAmFC:mReporting,mAI
CPAmPC:mNone,mIMA:m BusinessmEconomics
21. Both minvestors mandmcreditorsmhaveman minterestminmamcompany’s mability mto mgeneratemfa
vorablemcash mflows.
Ans:m T,m LO:m 2,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:mGovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
22. Freemcash mflowmis mnetmcash mprovided mby moperating mactivities mless mcapital mexpenditures.
Ans:m F,m LO:m 2,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:mGovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m Reporting
23. In m them statementm ofm cash m flows,m netm cash m provided m by m operatingm activities m indicat
es m themcash-generating mcapability mofmthemcompany’s moperations.
Ans:m T,m LO:m 2,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m
AICPAm PC:m None,m IMA:m Reporting
24. Freemcash mflowmis mnetmcash mprovided mby moperating mactivities mless mdividends.
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 Measu
rementm Analysism andm Interpretation,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
25. Long-termmcreditors mconsider mamhigh mfreemcash mflowmamountman mindication mofmsolvency.
Ans:m T,m LO:m 2,m Bloom:mC,mDifficulty:mMedium,m Min:m1,mAACSB:mNone,m AICPAmBB:m GovernancemPerspective,mAICPAmFC:m RiskmMan
agement,m Analysism andm Management,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
FORmINSTRUCTORmUSE mONLY
mynursytest.store
m m m m m m m m m m
ion Making 9th Edition Kimmel
m m m m
CHAPTER 2 m
AmFURTHER mLOOK mAT mFINANCIALmSTATEMENTS
CHAPTERmLEARNINGmOBJECTIVES
1. Identifymthemsectionsmof mamclassified mbalancem sheet.mIn mamclassified mbalancemsheet,m
companies mclassify massets masmcurrentmassets;mlong-
termminvestments;mproperty,mplant,mand mequipment;mand mintangibles.mThey mclassifymliabiliti
es mas meither mcurrentmor mlong-
term.mAmstockholders’mequity msection mshows mcommon mstock mand mretained mearnings.
2. Usemratios mtomevaluatem amcompany’s mprofitability,mliquidity,mandm solvency. mRatio ma
nalysis mexpresses mthemrelationship mamong mselected mitems mofmfinancial mstatements mdata.m
Profitability mratios,msuchmas mearnings mper msharem(EPS),mmeasuremaspects mofmthemoperatin
g msuccess mofmamcompany mfor mamgiven mperiod mofmtime.
Liquidity mratios,msuch mas mthemcurrentmratio,mmeasuremthemshort-
termmability mofmamcompany mto mpay mits mmaturing mobligations mand mto mmeetmunexpected mnee
dsmfor mcash.mSolvencymratios,msuch mas mthemdebtmto massetsmratio,mmeasuremthemabilitymofm
amcompany mto msurvivemover mamlong mperiod.
Freemcashmflowmindicates mamcompany’s mability mto mgeneratemcash mfrommoperations mthatmis
msufficientmto mpay mdebts,macquiremassets,mand mdistributemdividends.
3. Discussmfinancialmrepo rting mconcepts.mGenerally maccepted maccounting mprinciples marem
amsetmofmrules mand mpracticesmrecognized mas mamgeneral mguidemfor mfinancial mreporting mpurp
oses.mThembasic mobjectivemofmfinancial mreporting mis mto mprovideminformation mthatmismuseful
mfor mdecision- mmaking.
To mbemjudged museful,minformation mshould mhavemthemprimarymcharacteristics mofmrelevancem
and mfaithfulmrepresentation.mIn maddition,museful minformation mis mcomparable,mconsistent,mve
rifiable,mtimely,mand munderstandable.
Themmonetary munit massumptionmrequires mthatmcompanies mincludemin mthemaccounting mrecord
s monly mtransaction mdatamthatmcan mbemexpressed min mterms mofmmoney.mThemeconomic mentit
y massumptionmstates mthatmeconomic meventsmcanmbemidentified mwith mamparticular munitmofma
ccountability.mThemperiodicity massumptionmstates mthatmthemeconomic mlifemofmambusinessmca
n mbemdivided mintomartificial mtimemperiods mandmthatmmeaningful maccounting mreports mcan mbe
mprepared mformeach mperiod.mThemgoingmconcernmassumptionmstates mthatmthemcompany mwil
l mcontinuemin moperation mlong menough mto mcarry moutmits mexisting mobjectives mand mcommitme
nts.
Themhistorical mcostmprinciplemstates mthatmthemcompanies mshould mrecord massets matmtheirmco
st.mThemfairmvaluemprinciplemindicatesmthatmassetsmandmliabilitiesmshould mbemreportedmatmfai
r mvalue.mThemfullmdisclosuremprinciple mrequires mthatmcompanies mdisclosemcircumstances man
d mevents mthatmmatter mto mfinancial mstatementmusers.
Themcostmconstraintmweighs mthemcostmthatmcompanies mincur mto mprovidemamtypemofminforma
tion magainstmits mbenefitmto mfinancial mstatementmusers.
FORmINSTRUCTORmUSE mONLY
mynursytest.store
,DOWNLOAD THE Test Bank for Financial Accounting Tools for Business Decis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
2-2 TestmBankmformFinancialmAccounting: mToolsmformBusinessmDecision mMaking,mNinth mEdition
TRUE-FALSEmSTATEMENTS
1. Cash mand msupplies maremboth mclassified mas mcurrentmassets.
Ans:m T,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
2. Long-
termm investments m appear m inm them property,m plant,m andm equipmentm sectionm ofm the
mbalancemsheet.
Ans:m F,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
3. Amliability mis mclassified mas mamcurrentmliability mifmitmis mto mbempaid mwithin mthemcoming myear.
Ans:m T,m LO:m 1,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
4. Stockholders’mequity mis mdivided minto mtwo mparts:mcommon mstock mand mretained mearnings.
Ans:m T,m LO:m 1,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
5. Itmis mpossiblemfor manmassetmtombemamcurrentmassetmeven mthoughmthemexpected mconver
sion mofmthatmassetminto mcashmismtombemlonger mthanmonemyear mormthemnormal moperating
mcycle.
Ans:mF,mLO:m1,mBloom:mC,mDifficulty:mMedium,mMin:m1,mAACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAmFC:mReporting,mAIC
PAmPC:mNone,mIMA:m Reporting
6. Them investmentm category m onm them balancem sheetm normallym includes m investments m th
atm aremintended mto mbemheld mfor mamshortmperiod mofmtimem(less mthan monemyear).
Ans:m F,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
7. Themmain mdifferencembetween mintangiblemassets mandmproperty,mplantmandmequipmentmi
s mthemlength mofmthemasset’s mlife.
Ans:m F,m LO:m 1,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
8. Profitability mmeans mhaving menough mfunds mon mhand mto mpay mdebts mwhen mthey mfall mdue.
Ans:m F,m LO:m 2,m Bloom:mK,mDifficulty:mMedium,m Min:m1,m AACSB:m None,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m RiskmManag
ement,m Analysism andm Management,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
9. Earnings mper msharemis mcalculatedmby mdividingmnetmincomemminus mpreferredmstockmdivi
dends mformthemperiodmbymthemaveragemnumber mofmcommonmshares moutstanding mdurin
g mthemperiod.
Ans:m T,m LO:m 2,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m BusinessmEconomics
10. Earnings mper msharemmeasures mthemnetmincomemavailablemon meach msharemofmcommon mstock.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m BusinessmEconomics
11. Liquidity mratios mmeasuremthemshort-
termmability mofmamcompanymto mpaymits mmaturing mobligations mandmmeetmunexpected mnee
ds mfor mcash.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
12. Solvency mratios mmeasuremthemability mofmamcompany mto msurvivemover mamshortmperiod mofmtime.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m AI
CPAm PC:m None,m IMA:m Reporting
FORmINSTRUCTORmUSE mONLY
mynursytest.store
, DOWNLOAD THE Test Bank for Financial Accounting Tools for Business Decis
m m m m m m m m m m
ion Making 9th Edition Kimmel m m m m
A mFurthermLookmatmFinancialmStateme 2-3
nts
13. Profitability mratios mmeasuremthemoperating msuccess mofmamcompany mfor mamgiven mperiod mofmtime.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
14. Themcurrentmratio mis mcomputed mas mcurrentmliabilities mdivided mby mcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m Reporting
15. Themexcess mofmcurrentmassets mover mcurrentmliabilities mis mcalled mworking mcapital.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
16. Themcurrentmratio mtakes minto maccountmthemcomposition mofmcurrentmassets.
Ans:m F,m LO:m 2,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
17. Solvency m ratios m measurem them short-
termm ability m ofm them company m to m pay m its m maturing mobligations.
Ans:m F,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
18. Themdebtmto massets mratio mmeasures mthempercentagemofmassets mfinanced mby mcreditors.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,m Min:m1,m AACSB:m None,m AICPAm BB:m GovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
19. Solvency mismamcompany'smability mtompay minterestmas mitmcomes mduemand mto mrepay mthem
balancemofmamdebtmduematmits mmaturity.
Ans:m T,m LO:m 2,m Bloom:m K,m Difficulty:m Easy,mMin:m 1,m AACSB:m None,m AICPAm BB:m Governancem Perspective,m AICPAm FC:m Riskm Man
agement,m Analysism andm Management,mAICPAmPC:mProjectmManagement,mIMA:mBusinessmEconomics
20. Netmcash mprovided mby moperating mactivities mtakes mintomaccountmthatmamcompany mmustmi
nvestmin mcapital mexpenditures mjustmto mmaintain mits mcurrentmlevel mofmoperations.
Ans:mF,mLO:m2,mBloom:mC,mDifficulty:mMedium,mMin:m1,mAACSB:mNone,mAICPAmBB:mGovernancemPerspective,mAICPAmFC:mReporting,mAI
CPAmPC:mNone,mIMA:m BusinessmEconomics
21. Both minvestors mandmcreditorsmhaveman minterestminmamcompany’s mability mto mgeneratemfa
vorablemcash mflows.
Ans:m T,m LO:m 2,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:mGovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m BusinessmEconomics
22. Freemcash mflowmis mnetmcash mprovided mby moperating mactivities mless mcapital mexpenditures.
Ans:m F,m LO:m 2,m Bloom:m K,mDifficulty:mEasy,mMin:m 1,mAACSB:m None,m AICPAm BB:mGovernancemPerspective,mAICPAm FC:m Reporting,m
AICPAm PC:m None,m IMA:m Reporting
23. In m them statementm ofm cash m flows,m netm cash m provided m by m operatingm activities m indicat
es m themcash-generating mcapability mofmthemcompany’s moperations.
Ans:m T,m LO:m 2,m Bloom:m C,mDifficulty:mEasy,mMin:m 1,mAACSB:mNone,m AICPAmBB:mGovernancem Perspective,m AICPAmFC:m Reporting,m
AICPAm PC:m None,m IMA:m Reporting
24. Freemcash mflowmis mnetmcash mprovided mby moperating mactivities mless mdividends.
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 Measu
rementm Analysism andm Interpretation,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
25. Long-termmcreditors mconsider mamhigh mfreemcash mflowmamountman mindication mofmsolvency.
Ans:m T,m LO:m 2,m Bloom:mC,mDifficulty:mMedium,m Min:m1,mAACSB:mNone,m AICPAmBB:m GovernancemPerspective,mAICPAmFC:m RiskmMan
agement,m Analysism andm Management,mAICPAmPC:mNone,mIMA:mBusinessmEconomics
FORmINSTRUCTORmUSE mONLY
mynursytest.store
