QUESTION As a potential lender, why is First State Finances interested in the level of owners’ equity at Chesapeake Zoo? A) It represents sales revenue that could be used to pay off loans. B) Owners’ equity represents easily liquidatable assets. C) It is a predictor of the firm’s profitability in the future. D) It represents […]
QUESTION Which of the following is NOT a type of asset? A) current B) fixed C) intangible D) owners’ equity E) goodwill ANSWER Answer: D Explanation: D) Assets are of three types: current, fixed, and intangible (goodwill). Owners’ equity is NOT a type of asset; it is, rather, the value of a firm if […]
QUESTION Which of the following could NOT be a marketable security? A) stocks B) bonds C) money market certificates D) notes payable E) government securities ANSWER Answer: D Explanation: D) Marketable securities are stocks, bonds, government securities, and money market certificates, which can be easily converted to cash. Notes payable is money owed on […]
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. […]
QUESTION Which of the following is considered a long-term liability? A) a payment obligation that is due in two years B) a patent or trademark C) merchandise that is being held for resale to customers D) accounts payable E) owners’ equity greater than $1 million ANSWER Answer: A Explanation: A) Long-term liabilities are obligations […]
QUESTION What are bonds payable? A) a long-term liability based on purchases made on credit B) a long-term liability based on money loaned to the firm C) money that is owed to the company by customers buying on credit D) assets that are not as easily liquidated as others E) merchandise that has been bought […]
QUESTION Which of the following is NOT an example of a current liability? A) notes payable B) accounts payable C) a six-month bank loan D) bonds payable E) an unpaid electric bill ANSWER Answer: D Explanation: D) Current liabilities are obligations in which payments are due within one year. The most common current liabilities […]
QUESTION Which of the following is NOT true of the statement of cash flows? A) It reveals the firm’s cash receipts. B) It shows disbursement related to the firm’s operating activities. C) It shows disbursement related to the firm’s investing activities. D) It reports over a defined period of time. E) It determines the gross […]
