QUESTION Which of the following, if true, strengthens the case that an income statement would show Streeter & Sons where its problems lie? A) The company does not have enough shareholders. B) The company’s expenses are too high. C) The company’s owners’ equity is too low. D) The company needs to hire more service specialists. […]
QUESTION Which of the following, if true, weakens the case that more than one type of financial statement should be examined in order to determine a company’s financial health? A) Nowadays, many companies burnish their balance sheet by claiming inflated figures for goodwill. B) An income statement from one year may be radically different from […]
QUESTION Which of the following points out a flaw in Kershner’s reasoning? A) Kershner is not accounting for all of the possible sources of revenue for the company. B) Kershner is not including owners’ equity as part of sales revenue. C) Income statements are not as important as balance sheets in determining a company’s fiscal […]
QUESTION Which of the following, if true, strengthens Michaels’s argument? A) The company’s gross sales went up from the previous year. B) Total operating expenses were high in the current year. C) The company has only one part-time accountant. D) There were few sales returns in the current year. E) Offshoring allowed the company to […]
QUESTION Which of the following does Kershner assume? A) High revenues equate to a healthy income statement. B) Many factors must be taken into account to calculate the income statement. C) The company’s revenue next year will be as good as this year’s. D) Operating expenses have been relatively high this year. E) Net sales […]
QUESTION Santos needs to assess its debt situation with respect to the value of the company. Which of the following, if true, most strengthens the case that Santos’s debt is manageable? A) Santos has a high profitability ratio. B) Santos has a high inventory turnover ratio. C) Santos has a low inventory turnover ratio. D) […]
QUESTION Which of the following, if true, strengthens Kershner’s argument? A) The total operating expenses were high in the current year. B) The company’s rent went up 30 percent from the previous year. C) The cost of goods sold was low compared to net sales. D) The company is a small one compared to its […]
QUESTION What is the difference between managerial and financial accounting? What will be an ideal response? ANSWER Answer: Whereas managerial accounting is concerned with preparing accounting information and analyses for managers and other decision makers inside an organization, financial accounting is concerned with preparing such information and analyses primarily for people outside the organization. […]
QUESTION The Mystery Book Nook is a new shop in a busy suburban mall. Which of the following will contribute to a healthy activity ratio for it? A) having a high owners’ equity B) keeping enough cash on hand C) having high net sales revenues D) having enough liquidatable assets E) maintaining a small inventory […]
QUESTION Why is it important that external audits be independent audits? What will be an ideal response? ANSWER Answer: External audits must be independent because the outsiders for which they are performed rely on them being unbiased opinions about the truth of the financial data being reviewed. Explanation: External auditors perform audits under the […]
