HSB Principles of Finance Exam
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Accountant - CORRECT ANSWER A person who plans, summarizes, analyzes, and interprets
accounting information.
Accounting - CORRECT ANSWER Planning, recording, analyzing, and interpreting financial
information.
Accounting cycle - CORRECT ANSWER The series of accounting activities included in
recording financial information for a fiscal period.
Accounting system - CORRECT ANSWER Methods and procedures used in handling the
business's financial information.
Accrual accounting method - CORRECT ANSWER Method of accounting that records
transactions at the time they occur even if no money changes hands at the time.
Bookkeeping - CORRECT ANSWER The step in the accounting process that actually records
the business's financial information.
Cash accounting method - CORRECT ANSWER Method of accounting in which income and
expenditures are recorded at the time the money changes hands.
Financial accounting - CORRECT ANSWER Accounting information and analyses prepared
for people outside the organization.
Managerial accounting - CORRECT ANSWER Accounting used to provide information and
analyses to managers inside the organization to assist them in decision making.
Accounts receivable - CORRECT ANSWER Monies owed to a business by its customers
, Accounts payable - CORRECT ANSWER Money owed, or payable, to a business's creditors
Owners' equity - CORRECT ANSWER The amount an owner has invested in the business plus
or minus profits and losses
Revenue - CORRECT ANSWER An increase in owner's equity resulting from the operation of
a business
Expense - CORRECT ANSWER Money that a business spends
Transaction - CORRECT ANSWER A business activity such as a sale, a purchase, or a return
Administration of assets - CORRECT ANSWER Finance activity involving making decisions
about a firm's investments.
Asset - CORRECT ANSWER Anything of value that a business or individual owns.
Capital budgeting - CORRECT ANSWER Process in which a firm's financial managers
determine which projects it should invest in.
Capital structure - CORRECT ANSWER A firm's mix of financing, usually some combination
of debt and equity.
Cash conversion cycle - CORRECT ANSWER Ratio that refers to the number of days between
a company's paying for raw materials and receiving cash from selling the products made from those
raw materials.
Debt - CORRECT ANSWER Amount of money businesses or individuals owe to others.
Dividend - CORRECT ANSWER A sum of money paid to an investor or stockholder as
earnings on an investment.
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Accountant - CORRECT ANSWER A person who plans, summarizes, analyzes, and interprets
accounting information.
Accounting - CORRECT ANSWER Planning, recording, analyzing, and interpreting financial
information.
Accounting cycle - CORRECT ANSWER The series of accounting activities included in
recording financial information for a fiscal period.
Accounting system - CORRECT ANSWER Methods and procedures used in handling the
business's financial information.
Accrual accounting method - CORRECT ANSWER Method of accounting that records
transactions at the time they occur even if no money changes hands at the time.
Bookkeeping - CORRECT ANSWER The step in the accounting process that actually records
the business's financial information.
Cash accounting method - CORRECT ANSWER Method of accounting in which income and
expenditures are recorded at the time the money changes hands.
Financial accounting - CORRECT ANSWER Accounting information and analyses prepared
for people outside the organization.
Managerial accounting - CORRECT ANSWER Accounting used to provide information and
analyses to managers inside the organization to assist them in decision making.
Accounts receivable - CORRECT ANSWER Monies owed to a business by its customers
, Accounts payable - CORRECT ANSWER Money owed, or payable, to a business's creditors
Owners' equity - CORRECT ANSWER The amount an owner has invested in the business plus
or minus profits and losses
Revenue - CORRECT ANSWER An increase in owner's equity resulting from the operation of
a business
Expense - CORRECT ANSWER Money that a business spends
Transaction - CORRECT ANSWER A business activity such as a sale, a purchase, or a return
Administration of assets - CORRECT ANSWER Finance activity involving making decisions
about a firm's investments.
Asset - CORRECT ANSWER Anything of value that a business or individual owns.
Capital budgeting - CORRECT ANSWER Process in which a firm's financial managers
determine which projects it should invest in.
Capital structure - CORRECT ANSWER A firm's mix of financing, usually some combination
of debt and equity.
Cash conversion cycle - CORRECT ANSWER Ratio that refers to the number of days between
a company's paying for raw materials and receiving cash from selling the products made from those
raw materials.
Debt - CORRECT ANSWER Amount of money businesses or individuals owe to others.
Dividend - CORRECT ANSWER A sum of money paid to an investor or stockholder as
earnings on an investment.
