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 makes ratio analysis such a useful tool? What will be an ideal response? ANSWER Answer: Ratio analysis can be used to analyze a firm’s performance compared not only to its stated objectives but also to that of similar firms. Because of that, it gives a picture of how a firm stands against […]
QUESTION Which of the following does Michaels assume? A) Revenues this year were not as high as last year’s. B) Revenues are not as high as Kershner thinks they are. C) Selling expenses exceeded administrative expenses this year. D) Other factors must be taken into account to arrive at an income statement. E) Income taxes […]
QUESTION Which of the following, if true, supports the mother’s position? A) Julie has said that she wants to work for one of the Big Four accounting and professional services firms. B) The demand for government accountants is expected to grow in the near future. C) Two other recent grads in Julie’s class chose to […]
QUESTION Santos has a high level of current liabilities compared to its cash on hand. One company executive predicts that this means that Santos will not have a good acid-test ratio. Which of the following points out a flaw in his argument? A) Current liabilities are not relevant to the acid-test ratio. B) The company […]
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 […]
QUESTION Briefly summarize the six steps of the accounting process. What will be an ideal response? ANSWER Answer: In the accounting process, an accountant finds and sorts records, puts daily transactions in journals, puts journal entries in categories in a ledger, tests the accuracy of the ledger by running a trial balance, reports on […]
QUESTION What is a forensic accountant? What will be an ideal response? ANSWER Answer: A forensic accountant investigates suspected crimes within the field of finance, such as fraud. They also investigate crimes against property, give expert testimony in court trials, and perform work related to civil disputes. Explanation: A forensic accountant investigates suspected crimes […]
