POB Unit 6
Which of the following is a key component of managing working capital:
Cash conversion cycle
Which of the following is an example of a current asset
Checking Account
When a fixed asset depreciates, it
decreases in value on the balance sheet.
When return on capital is positive, the company is
growing in value.
A balance sheet shows
how much money a company owes.
Owners' equity may also be called
net worth
A company's current balance of assets and liabilities falls under the focus of
working capital management.
Net Loss
19. On an Income State if the Total Expenses were greater than the Cost of Goods Sold the outcome would be a
Money the business owes is known as
accounts payable.
CCC = 182.5 + 3.9 - 103.4 = 83 days
If DIO = 182.5 days, DSO = 3.9 days, and DPO = 103.4 days, what is the Cash Conversion Cycle?
Money owed to the business is known as
accounts receivable.
The cash conversion cycle should be
as short as possible.
Determining which projects a business should invest in is known as
capital budgeting.
Assets a company already owns and can use to finance a new venture are called
equity.
Finance is the business function that involves managing
money.
The finance function would definitely be involved in a decision regarding
new business projects and strategies.
Accounting is distinct from finance because its main focus is on
recordkeeping activities.
The goals of the finance function are to ensure profitability and to
reduce risks.
The balance sheet is sometimes called the
statement of financial position.
Bookkeeping records business transactions.
24. Which of the following is a true statement:
the accrual method of accounting
25. Accounting records for a business show that the week's total sales revenues were $125,000. Cash sales accounted for $50,000 and credit sales, $75,000. This is an example of
A debit in Assets increases while a debit Liabilities decrease
26. In the Accounting Equation which of the following statements are true
Managers
27. Which of the following groups makes regular use of a business's managerial accounting information:
: Accounting Equation
28. The foundation for accounting; represents the relationship between assets, liabilities, and owners' equity, is known as the
identify trends in the industry
30. Riley is an employee of the federal government who studies the financial reports of major busi-nesses in a specific industry. The government's purpose in assigning this task to Riley is to
control the finances of the business.
31. The overall purpose of accounting is to
applying for a bank loan
32. A creditor is most likely to examine a business's financial accounting records if the business is
Equity
33. Also known as stockholders' (or shareholders') equity, book value, and net worth.
Net Worth = Owner's Equity
34. Which of the following is true
Accrual method
35. What type of accounting method would most likely be used by a large business that has a large number of outstanding loans and customer charge accounts?
Assets, liabilities, owner's equity
37. Which of the following categories of information are found on a balance sheet:
Cash method
38. What type of accounting method would most likely be used by a small business owner who does not offer credit?
1.27 ratio and is desirable
39. What is the Working Capital Ratio, if Current Assets are $350,000 and Current Liabilities are $275,000 and what is does the indicator represent?
Source documents
41. Checks, receipts, invoices, and purchase orders are examples of
To control expenses
42. What is one of the main reasons why businesses need to keep accurate accounting records?
Balance sheets.
43. Businesses use the information collected through the accounting process to prepare accurate:
General Journal
A chronological record of the transactions, showing an explanation of each transaction, the accounts affected, whether those accounts are increased or decreased, and by what amount are the
An accounting device used to analyze transactions is called
T Account
obtaining funds.
The role of finance in business often involves:
Which of the following is a true statement regarding fixed assets
They take longer than a year to convert into cash.
What does an accurate income statement often help a business to identify?
Trouble spots
Protection from theft and fraud
Two employees used a business's computerized accounting system to change some records. They were able to steal $50,000 from the business because the accounting system lacked which of the following:
The information about profit in a business's income statement helps to establish a business's stocks
Value
Income statement
What accounting record would summarize a business's profit or loss for a previous year?
finance.
When businesses invest funds to expand, they are involved in the process of:
Cash Conversion Cycle
Which measures how fast a company can convert cash on hand into even more cash on hand
Cash flow statement
Which of the following financial reports provides estimates of when, where, and how much money will come into and out of a business next year:
It should provide needed information quickly.
Which of the following is a requirement for a good accounting system:
Accounting standards
Which of the following makes comparisons of the financial conditions at multiple organizations possible:
Analyze, journalize, and post
Which of the following presents the first three steps in the accounting cycle in the correct order:
They show the business how it is doing
Why are accurate accounting records important to a business?
A business has $57,500 in Liabilities and $20,000 in Owner's Equity, how much are there in Assets?
$77,500
Rent Payable
21. Which of the following is a Liability?
Balance Sheet
20. A bank denies a business owner's application for credit saying, "We feel that you would be un-able to make the monthly payments because of your other debts." What financial report did the bank review?
Accounting Systems
22. Businesses would not be able to determine if they are meeting their financial goals without accurate:
Retail-type companies
29. Cash Conversion Cycle is most effective with
Which of the following is an example of a short-term liability
Accounts payable
Accounts Receivable
All monies owed to a firm by its customers are
Items of value are listed under which of the following components of the balance sheet
Assets
Accounting Equation
Assets = Liabilities + Owner's Equity
The finance function is usually responsible for which of the following processes:
Budgeting
Which of the following is an example of an asset
Cash
A business that loses items to theft includes those items in which category of the income statement?
Cost of goods sold/Cost of sales
Monitoring the financial status of a business helps the business to decide what to do with
Earned profit
How does the finance function relate to company spending?
It plans and controls spending.
Which of the following are usually responsible for analyzing a business's income statement:
Managers
The "bottom line" in a business's income statement indicates
Net income
Another term for an income statement is a(n)
Operating statement
accounting
The process of keeping the financial records of a business is known as
Cash
Which of the following is an Asset?
Assets = Liabilities + Owners' Equity
23. The formula for the Accounting Equation is
Which of the following is the accounting equation
Assets = Liabilities + Owners' Equity
equity.
Assets a company already owns and can use to finance a new venture are called:
By comparing the categories in an income statement, a business will be able to determine if it is
Spending too much on expenses.
A balance Sheet is sometimes called
Statement of financial position
One of the reasons why an income statement should be as accurate as possible is that businesses use it to develop additional
Financial documents
Which of the following phrases effectively describes a business's income statement:
Financial picture
accurate and up to date.
For an accounting system to be useful to the business, the accounting information it contains must be
What category of an income statement indicates total profit?
Gross profit
Which of the following is a capital investment decision:
How to finance investments
Deduct
In any accounting document, the phrase "Less" means to
Which of the following is the basic calculation used to analyze an income statement:
Income minus expenses
What might a business decide to do after comparing the categories in its income statement?
Increase revenues
One reason why a business compares its income statement figures with those of competitors is to find out how it is doing in relation to
Industry standards
Stockholders monitor a business's income statement because they are the business's
Owners
A business analyzes the information in an income statement by transforming the final numbers into financial
Ratios
One reason why creditors review a business's income statement is to decide if the business will be able to
Repay a loan
Which of the following is a measure of how well a business generates cash flow:
Return on capital
Interest a business earns from its bank accounts is included in which category of the income statement?
Revenue
Businesses often compare the income statement information for several consecutive years to calculate
Sales growth
Which of the following is an example of an expense that a business would include in the operating-expenses category of an income statement:
Shipping charges
Decisions about financing refer to the
acquisition of funds.
The portion of a business's value that belongs to its owners or stockholders is known as
equity.
A business's managers often study a series of past balance sheets to
identify and analyze financial trends within the company.
The finance function ensures that the company's financial goals are
in line with organizational priorities.
The balance sheet has a close relationship with the company's
income statement.
To keep communication flowing with other departments, the finance function depends on
information systems.
All of a business's assets come from two sources—borrowing and/or
investment.
The administration of assets refers to decisions about
investments.
Which user studies a balance sheet to determine if the company will provide a good rate of return
investor