QUESTION Why do you think management by data will, ultimately, be a good thing for all corporations? What will be an ideal response? ANSWER Answer: Just as competition is good for a free market economy, so too is the new trend of management by data. As companies try to keep ahead of their rivals […]
QUESTION What is an example of a liability? What will be an ideal response? ANSWER Answer: Outside vendors that have provided labor but not yet been paid represent a debt to the firm and, therefore, a liability. Explanation: A liability is a debt owed by a firm to an outside individual or organization. Outside […]
QUESTION If fixed assets are assets that are held for a long time, and a certain company has had goodwill for all of its years in business, then should its goodwill be considered a fixed asset? What will be an ideal response? ANSWER Answer: Fixed assets are TANGIBLE assets that are held onto for […]
QUESTION How does the cost of goods sold affect the gross profit as calculated in an income statement? A) It helps to predict what future profits will be. B) It increases the gross profits. C) It is figured into operating expenses. D) It does not affect the gross profits. E) It is subtracted from net […]
QUESTION What is the importance of owners’ equity in accounting? What will be an ideal response? ANSWER Answer: Owners’ equity is considered important because it is used to indicate a company’s financial strength and stability. Before making loans to a company, for example, lenders want to know the amount of owners’ equity in it. […]
QUESTION Thom is an accountant at Merco Products. Merco has decided to put a priority on paying off short-term debt to ensure its continued financial health. Which of the following types of ratio analyses is Thom most likely to do to further this goal? A) an activity ratio B) a debt-to-owners’-equity ratio C) a liquidity […]
QUESTION What is balanced in a balance sheet? What will be an ideal response? ANSWER Answer: A balance sheet shows a balance between a firm’s assets and liabilities plus owners’ equity, per the “accounting equation.” Explanation: A balance sheet reports a firm’s financial condition at a given time by showing its assets, liabilities, and […]
QUESTION What is the name given to what is owed to a firm from customers who have purchased goods or services on credit? A) accumulated depreciation B) intangible asset allocation C) merchandise inventory D) accounts receivable E) fixed asset reward ANSWER Answer: D Explanation: D) Accounts receivable is that which is owed to a […]
QUESTION What characteristic must an asset have in order to count as a current asset? A) tangibility B) liability C) goodwill D) permanence E) liquidity ANSWER Answer: E Explanation: E) The essential characteristic of current assets is their liquidity; they are easily converted into cash, whereas assets such as land and buildings are not.
QUESTION Which of the following would retained earnings NOT be used for? A) to invest in newer equipment B) to pay dividends C) to buy another company D) to rebuild the plant E) to pay off bank loans ANSWER Answer: B Explanation: B) Retained earnings are net profits minus dividend payments made to shareholders. […]