CH.17 Business

Operating expenses include which of the following?

Supplies rent utilities

It's possible for a business to increase is sales and profits yet still suffer _______ problems.

cash flow

Which of the following has the highest liquidity?

current assets

Net income after taxes divided by the number of common stock shares outstanding is called

earnings per share

Revenue minus costs of goods sold is called

gross profit

A major purpose of accounting is to help internal _______ make well-informed decisions.

managers

Rent, salaries, supplies, utilities, and insurance are examples of ________ expense that are general expenses.

operating

Net income or meet loss is the difference between:

revenues and expenses

Cash receipts and disbursements related to operations, investments, and financing a reported on the:

statement of cash flows

Revenue is the monetary value of what a firm received for:

- goods sold -services rendered -interest earned

On a balance sheet, assets may include

- intangible earnings - tangible earnings

Which of the following would be shown on an income statement?

- revenue -net income -operating expenses

Common financial transactions include:

-acquiring insurance -buying and selling goods -paying employees

The major activities of a firm include operations,________, and financing.

investments

A _____ is a record book or computer program where accounting data are first entered.

journal

Transactions that are entered in the journal are then posted to specific categories in a(n)

ledger

What type of ratios measure the degree to which a firm relies on borrowed funds in its operations?

leverage

Debts, known for accounting purposes as

liabilities

Stockholders equity is the value of what stockholders' own in a firm minus _____

liabilities

_____ ratios measure a company's ability to turn assets into cash to pay its short-term debt.

liquidity

Which of the following would be shown on an income statement?

net income revenue operating expenses

Gross profit is:

net sales minus cost of goods sold

accounting is needed for ______ organizations as well as for profit-seeking firms.

nonprofit

______ ratios measure how effectively a firm is using its various resources to achieve profits.

profibility

Earnings per share, return on sales, and return on equity are all examples of ratios.

profitability

Which of the following provides a summary of money coming into and going out of the firm?

statement of cash flows

The major categories on the balance sheet include which of the following?

- owners equity - liabilities - assets

What are the main types of financial ratios used in ratio analysis?

- profitability ratios -activity ratios -liquidity ratios - debt ratios

Bookkeeping involves the ________ of business transactions, whereas ______ classify and summarize financial data provided by bookkeepers.

- recording -accountants

________ are economic resources owned by a firm.

assets

The fundamental accounting equation is the basis for the:

balance sheet

The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding:

business operations

Business that are not Incorporated identify the investment of the sole proprietor through the ________ account.

capital

What identifies the investments of the store proprietor in a businesses that are not Incorporated?

capital account

Accounting reports and ______ ________ are critical to understanding the health of a business.

financial statements

Management decision making is based on a firm's financial health and stability which are shown on the

financial statements

Arthur Andersen was convicted of obstruction of justice for______ records in the Enron case.

shredding

If a firm has cash of $50,000, current assets of $500,000, and current liabilities of 200,000, what is the current ratio?

2.50

What is a term given to specialized accounting book or computer programs in which information is transferred into specific categories, so managers can find all the information about a single account in one place?

Ledger

What are retained earnings?

accumulated earnings not paid out to stockholders

Ratios used to measure the effectiveness of management in utilizing the assets that are available are called

activity ratios

A balance sheet reports on:

a firm's financial status on a specific date

Return on Sales is:

net income divided by net sales

The bottom line is another name for:

net income or loss

Which of the following is considered to be a part of accounting?

- recording financial transactions -interpreting financial transactions -classifying financial transactions

Stakeholders who want to look at detailed financial information on the financial condition, progress, and expectations of a company will look at

an annual report

Which financial statement shows a firm's profit after cost, expenses, and taxes?

income statement

Which financial statement's purpose is to reveal whether a business is earning a profit of losing money?

income statement

The ______ statement shows all of a firms revenues, cost, and whether it made a profit or loss during a specific period.

income

The ______ _______ summarizes revenues, costs, and expenses over a specific., which may be a week, a month, or a year.

income statement

How many entries are required for each transaction in the ledgers?

two

The principles, define by FASB, that accountants must follow to ensure that a firm's accounting information is accurate are abbreviated as:

GAAP

Computerized _____ programs post information from journals instantaneously so that financial information is readily available.

accounting

Net income is:

all revenue minus all expenses and taxes

Which ratio is the cost of goods sold divided by the average inventory?

the inventory turnover ratio

Return on equity is net income minus taxes divided by:

total owner's equity

A journal is the place where:

transactions are first recorded

Before preparing the balance sheet, information from account ledgers is is summarized in the

trial balance

The formula for the costs of goods sold is:

purchase price plus freight charges plus storage costs

What are some benefits of using computers for accounting purposes?

- software can help if no strong accounting support is available. -information can be posted from journals instantaneously -computers can handle large amounts of financial information.

The method a company uses to record and summarize accounting data into reports is a (n)

accounting system