Business Exam 4

Front 1

1. The purpose of an audit is to ensure that financial statements have been prepared according to

Back 1

Generally accepted accounting principles

Front 2

2. The information provided by managerial accounting is of most benefit to a firm's

Back 2

Managers.

Front 3

3. ALL of the following are classified as fixed assets except

Back 3

computers held for resale.

Front 4

4. The mortgage on prudential Insurance's local facility will be paid off over the next 30 years. The majority of this mortgage would be classified on Prudential's balance sheet as a

Back 4

Long-term liability.

Front 5

5. A____ is a summary of a firm's revenues and expenses during a specified accounting period, such as a year.

Back 5

Income statement.

Front 6

6. Intel decides to issue new stock in order to build a new facility and expand its operations. The receipt of cash from this stock issue would appear in the _____section of the statement of cash flows.

Back 6

Financing

Front 7

7. As the accountant for Marston Retail Stores, you must calculate the current ratio for the firm's last accounting period.

Back 7

1.5

Front 8

8. All of the activities concerned with obtaining money and using it effectively are called.

Back 8

financial Management.

Front 9

9. Money that will be used for one year or less is called

Back 9

short-term financing

Front 10

Slater Co. has very old computers and manufacturing equipment and knows its needs to upgrade them or risk losing much of its business. Slater does not have the money to purchase the computers, so it will most likely need

Back 10

Long-term financing

Front 11

11. Maria has been asked by top management to develop financing______ that the company will achieve over the next one-to ten year period.

Back 11

Goals

Front 12

12. Each year Caliente, Inc, follows a budgeting process, The first step is always to look at the previous year's budget and see if anything need to be updated. Caliente uses _____budgeting.

Back 12

Traditional

Front 13

13. John Martin and Bob Johnston want to start a small manufacturing business. To obtain the financing they need, they decide to sell stock to their friends. The sale of stock is

Back 13

Equity Capital.

Front 14

14. in seeking financing to satisfy his short-term needs, jerry discovered that.

Back 14

short-term financing is usually easier to obtain than long-term financing.

Front 15

15. Melissa feels confident about obtaining short term financing for her art gallery because, like many companies, She has a

Back 15

Close working relationship with a lender.

Front 16

16. Short term financing not backed by collateral is called

Back 16

unsecured financing

Front 17

17.____ is short-term promissory notes with no collateral that are issued by large corporations.

Back 17

Commercial paper.

Front 18

18. A firm that specializes in buying other firm's

Back 18

financing

Front 19

19. During 2009, bedford technology sold common stock for the first time to whoever wanted to buy it. this was the ____ for bedford.

Back 19

Initial public offering

Front 20

20. What right do most common stockholders have that most preferred stockholders do not have?

Back 20

Voting rights

Front 21

21. A ___ is an agreement that gives a business the right to temporarily use real estate, equipment, or other assets that belong to someone else.

Back 21

Lease

Front 22

22. A promissory note that requires a borrower to repay funds in installments is called a

Back 22

Term-loan agreement.

Front 23

23.___ Accounting is the process of systematically determining how much money a company owes the internal revenue service.

Back 23

False

Front 24

24. It is not necessary to audit a firm's financial statements if the firm has used generally accepted accounting principles.

Back 24

False

Front 25

25. Without the audit function and GAAP, there would be very little oversight or supervision of corporate accounting practices.

Back 25

True

Front 26

26. The three primary financial reports are the income statement, the balance sheet, and the statement of cash flows.

Back 26

True

Front 27

27. Most of a firm's proprietary accounting information is reported to the general public in the firm's annual report.

Back 27

False

Front 28

28. While a firm's managers are the primary users of accounting information, lenders, suppliers. stockholders, and government agenices are also interested in a firm's accounting information.

Back 28

True

Front 29

29. A private accountant is an accountant whose service may be hired on a fee basic by individuals or business firms.

Back 29

False

Front 30

30. A person who wishes to practice accounting as a CPA must pass an exam prepared by the American Institute of Certified Public Accountant.

Back 30

False

Front 31

31. According to the accounting equation, cash, inventory, equipment, and real estate are classified as owners' equity.

Back 31

False

Front 32

32. The statement of financial position is also known as the balance sheet.

Back 32

True

Front 33

33. The process of apportioning the cost of a fixed asset over the period during which it will be used is known as depreciation.

Back 33

True

Front 34

34.the statement of financial position presents the business firm's assets, liabilities, and owners' equity accounts at the end of an accounting period, such as on December 31, where as the income statement summarizes operations during a specified accounting period.

Back 34

True

Front 35

35.the total dollar amount of all goods and service sold during the accounting period is called net sales.

Back 35

False

Front 36

36. The cost of goods sold equals beginning inventory plus net purchases minus ending inventory.

Back 36

True

Front 37

37. Managers often compare financial and accounting data for previous accounting periods and for competing firms.

Back 37

False

Front 38

38. Poor financial management is one of the major reasons why firms file for bankruptcy.

Back 38

True

Front 39

39. The first step in building a budget is to identify sources of debt financing.

Back 39

False

Front 40

40. When constructing budgets, most managers begin with departmental budgets that are then combined into a company- wide budget.

Back 40

True

Front 41

41. Equity capital generally provides the greatest part of a firm's financing.

Back 41

False

Front 42

42. A firm with questionable credit should expect to pay the prime interest rate minus 2 percent.

Back 42

False

Front 43

43.Long-term loans and the sales of corporate bonds are common sources of equity financing.

Back 43

False

Front 44

44. The distribution of a corporation's earnings to the stockholders is called paying a dividend.

Back 44

True

Front 45

45. The most basic form of corporate ownership is common stock.

Back 45

True

Front 46

46. If a firm's earnings should drop below the interest cost of borrowed money the return on owners' equity will increase.

Back 46

False

Front 47

47. it is not necessary to give most lenders a current business plan or andited financial statements when requesting a long-term business loan.

Back 47

False

Front 48

48. Bonds that are secured by various assets of the issuing corporation are called debenture bonds.

Back 48

False

Front 49

49. Bonds that can be exchanged for a specified number of shares of common stock are called convertible bonds.

Back 49

True

Front 50

50. In order to repay some corporate bonds, a firm may be required to deposit a specified sum of the money each year until the bond's maturity in a sinking fund.

Back 50

True