Ch15a

Some investors buy common stock in a firm in order to receive a dividend payout. The amount of the dividend is based on the company's profitability and is reported as _____.

earnings per share

When financial statements report _____, investors use this information to determine how much they will receive in dividends and as an indicator of the firm's stock value.

earnings per share

A firm's ________ system is concerned with external information users: consumer groups, unions, stockholders, suppliers, creditors, and government agencies.

financial accounting

There are several types of reports used to determine the financial health of an organization. Collectively, these reports are called _____ and are used to aid managerial decision making and to provide information to stakeholders.

financial statements

A firm's managers often have knowledge in addition to what is on the financial statements. When managers interpret and explain information that is contained in the financial statement, they are offering _____.

full disclosure

The basic formula behind the​ _____ is Revenues​ - Expenses​ = Net Income.

income statement

Borrowing funds allows organizations to make investments they otherwise might not be able to afford. This option gives the organization _____.

leverage

When an asset is easily converted to cash, it is considered to be _____.

liquid

Normally represented by borrowed funds, _____ include debts that are not due for at least one year.

long-term liabilities

Not all costs of an organization are directly related to generating revenue. Those costs not related to revenue are called _____.

operating expenses

On​ Google's income​ statement, which of the following would include the costs of research and development and​ salaries?

operating expenses

The net worth of an organization is based on the value of assets after all liabilities are paid. This remaining amount is _____.

owners' equity

Not all profits in an organization are spent or distributed. Those profits kept by the firm for future use are _____.

retained earnings

Joan is concerned that her​ company's cash account has a much lower balance than it did a year ago. Which financial statement would be most helpful in understanding why this​ happened?

statement of cash flows

CPAs can assist firms in restructuring operations and investments, saving them millions of dollars, as part of _____.

tax services

Which of the following terms refers to the comprehensive system for collecting, analyzing, and communicating financial information?

Accounting

________ is a comprehensive system for collecting, analyzing, and communicating financial information.

Accounting

What of the following best defines GAAP?

Accounting guidelines that govern the content and form of financial reports

Which procedure is used to identify, measure, record, and retain information so that it can be used in statements and managerial reports?

Accounting information systems

Which item should be added to current assets on the balance sheet?

Cash

Which type of forensic accountant evaluates accounting systems for weaknesses and risks, investigates white-collar crime, and evaluates internal organizational controls?

Certified fraud examiner

Managers across the organization must manage budget and perform other financial reporting functions. What type of accountant can help managers with nonaccounting backgrounds accomplish this task?

Certified management accountants

Which type of accountant has been certified by a state after passing an exam for auditing, tax, and management services to companies?

Certified public accountant

All public accountants must follow the _____ to ensure ethics-related issues are complied with, allowing the accountants to maintain certification with the AICPA.

Code of professional conduct

Which financial statement lists a firm's annual revenues and expenses so that a bottom line shows annual profit or loss?

Income statement

Who is the person in charge of operating the systems used for gathering, organizing, and distributing information?

Information systems manager

When a firm is for sale, the price might include goodwill based on its reputation in the market or the location of the office. What type of asset is goodwill?

Intangible

Under which type of asset would an investor find information on the value of patents, trademarks, and copyrights?

Intangible assets

What is the term for something that is produced by the mind, such as a new invention, that has commercial value?

Intellectual property

Which organization is responsible for developing a set of global accounting standards and for gaining implementation of those standards?

International Accounting Standards Board (IASB)

What does a company need to operate so that it has total control over its communications without dependence on other companies?

Its own VSAT system

What is the general term for the accountant whose role it is to help managers in various activities, such as marketing, production, or engineering?

Management accountant

In addition to supporting large organizations, some accountants act as consultants to small businesses and individuals. They might help with financial planning, executive recruitment, and planning corporate mergers. What accounting help should be pursued for these types of issues?

Management advisory services

What does an activity ratio measure?

Management's efficiency in using a firm's resources

Which of the following terms refers to the difference calculated by subtracting income taxes from the operating income of an organization?

Net income

Which of the following are the three categories on a company's cash flow statement?

Operating activities, investing activities, financing activities

operating expenses

Operating expenses include all the expenses that the company incurs to run its business other than the cost of revenues. Operating expenses include research and​ development, selling​ expenses, and administrative expenses such as salaries.

What is determined when gross profits from operations are subtracted from operation expenses?

Operating income

How is net income determined?

Operating income minus income taxes

When an investor buys shares of stock in an organization, they become a part owner. What is the investment by the owners?

Paid-in capital

What type of accountant should be used to manage the day-to-day financial business of a firm?

Private

Which of the following ratios would be most useful in measuring a firm's potential earnings?

Profitability ratio

What is created when funds flow into a business when goods or services are sold?

Revenue

Which of the following allows companies to produce in large volumes, but customers to purchase based on unique feature options?

Through mass-customization

By collecting input from several areas on proposed activities and expenses, _____ can provide detailed information on estimated expenses and income for a future period of time.

a budget

Bills that are unpaid and taxes that will be due within the year are part of _____.

accounts payable

A(n) ________ ratio is a financial ratio for evaluating management's efficiency in using a firm's resources by converting production into cash or sales.

activity

Land, buildings, equipment, inventory, and accounts receivable owned by a company are _______.

assets

Which of the following describes a liability?

A debt owed by a firm to an outside organization or individual

income statement

. An income statement is a financial statement that calculates the​ firm's profit or loss by subtracting expenses from revenues. The basic format of the income statement​ is: Revenues​ - Expenses​ = Net Income.

Which of the following best describes depreciation?

An accounting method for distributing the cost of an asset over its useful life

Which of the following best describes an asset?

An economic resource that is expected to benefit a firm or an individual who owns it

Which of the following BEST describes enterprise resource planning?

An information system for organizing and managing a firm's activities across product lines, departments, and geographic locations

Which of the following correctly shows the accounting equation?

Assets = Liabilities + Owners' Equity

Which of the following represents the accounting equation?

Assets = Liabilities + Owners' Equity

What procedure ensures the accounting information system is producing financial reports that are an accurate representation of the financial status of the organization?

Audits

Which of the following financial statements would provide detailed information about a firm's assets, liabilities, and owners' equity?

Balance sheet

How is the timing for revenue recognition determined on a firm's financial statement?

Based on the earnings cycle

Which of the following terms refers to the recording of financial transactions?

Bookkeeping

How can e-commerce help businesses with scattered geographical locations better compete?

By coordinating remote deliveries

Which section of the income statement indicates how much was spent to produce the product sold to others?

Cost of revenues

Which of the following best describes cost of goods sold?

Costs of obtaining materials for making the products sold by a firm during the year

What ratio should be used to determine a firm's ability to generate cash to meet current obligations?

Current

When a firm has debt that must be repaid within one year, where on the balance sheet should this be reflected?

Current liabilities

current

Current liabilities must be repaid within a year.

What feature allows people in remote locations to work simultaneously on one document?

Data conferencing

What is the term used for searching, sifting, and reorganizing pools of data to uncover useful information?

Data mining

The solvency of a firm is determined in part by the firm's total liabilities. What is another name for these liabilities?

Debt

Which of the following best describes liability?

Debt owed to an outside party

What is the term for the amount a firm will pay shareholders, based on the size of their investment in the company?

Earnings per share

Owners' equity is net worth minus liabilities.

False

Which of the following best describes managerial accounting?

Field of accounting that serves internal users of a company's financial information

Which of the following is the best description of an income statement?

Financial statement that shows the company's revenues, expenses, profits, or losses

A firm has many things of value in addition to products. What type of assets are the firm's land, building, and equipment?

Fixed

When a law enforcement agency needs a better understanding of the accounting practices of a firm under investigation, what type of accountant would it use?

Forensic accountant

________ are accounting guidelines that govern the content and form of financial reports.

GAAP

Which of the following refers to the rules and procedures governing the content and form of financial reports?

Generally accepted accounting principles

A short-term solvency ratio indicates the company's liquidity and ability to pay immediate debts. What is indicated by a high current ratio?

Risk to investors is lower

The Sarbanes-Oxley Act of 2002 was passed as a response to acts of accounting fraud. Which of the following is a provision of Sarbanes-Oxley?

Severe criminal penalties for persons committing fraud

Which of the following ratios would be most appropriate if a potential lender wanted to measure the borrower's ability to repay debt?

Solvency ratio

Which accounting principle is used to describe income for the year and payments made, acting as one of the most important statements of all?

Statement of cash flows

Spyware authors can use stolen information to create their own intellectual property.

TRUE

balance sheet

The balance sheet includes details about the​ company's assets,​ liabilities, and​ owners' equity. On the balance​ sheet, the total of all the​ company's assets will be exactly equal to the sum of the​ company's liabilities and​ owners' equity.

What does a solvency ratio measure?

The borrower's ability to repay debt

Which of the following best identifies gross profit?

The difference between total revenue and the cost of revenues

statement of cash flows

The statement of cash flows explains why the​ organization's cash has increased or decreased from the beginning of the year until the end.

Which type of IT threat can spread without a computer user needing to open any software?

Worms

What does a statement of cash flow describe?

Yearly receipts and cash payments

The​ _____ is the financial statement that is organized around the accounting equation.

balance sheet

Historically, the collection and recording of records such as taxes paid, income received, and expenses was called _____.

bookkeeping

A(n) ________ is the person who manages all of a firm's accounting activities by ensuring that the accounting information system provides the reports and statements needed for planning, decision making, and other management activities.

controller

The AICPA created the Vision Project to redefine the role of accountants for the world economy. The Vision Project identifies unique skills, technology, and knowledge a CPA will need, referred to as _____.

core competencies for accounting

On the balance​ sheet, _____ liabilities are debts that should be repaid within a year.

current