FIN 320-51 Ch.2 Quiz

What is GAAP and who oversees​ it? A. GAAP stands for Generally Accepted Accounting Principles. B. GAAP stands for Generally Accepted Accounting Policies. C. GAAP was established by the Financial Accounting Standards Board​ (FASB) and is the format required by the SEC when companies submit their quarterly and annual reports. D. GAAP regulations are enforced by the Internal Revenue Service.

A. GAAP stands for Generally Accepted Accounting Principles. C. GAAP was established by the Financial Accounting Standards Board​ (FASB) and is the format required by the SEC when companies submit their quarterly and annual reports.

Which of the following statements regarding the income statement is​ INCORRECT? A. The last or​ "bottom" line of the income statement shows a​ firm's net income. B. The first line of an income statement lists the revenues from the sales of products or services. C. The income statement shows the cash flows and expenses at a given point in time. D. The income statement shows the flow of revenues and expenses generated by a firm between two dates.

C. The income statement shows the cash flows and expenses at a given point in time.

Which of the following is NOT considered to be an operating expense on the income​ statement? Question content area bottom Part 1 A. administrative expenses and overhead B. salaries C. corporate taxes D. depreciation and amortization

C. corporate taxes

A​ company's​ after-tax profits measured per unit of common stock are known​ as​ ______. A. profits per share B. net income C. earnings per share D. none of these

C. earnings per share

What is a​ firm's net​ income? A. a measure of the​ firm's profitability over a given period B. the last or​ "bottom" line of the income statement C. the difference between the sales and other income generated by a​ firm, and all​ costs, taxes, and expenses incurred by the firm in a given period D. all of the above

D. all of the above

Earnings are an important measure to financial managers because investors use earnings to make forecasts about​ a​ company's​ ​ _____________ and ultimately stock​ price. A. employee satisfaction B. none of the above C. net income D. cash flows

D. cash flows

The major components of​ stockholders' equity are​ ________. A. common​ stock, liabilities, and retained earnings B. ​cash, common​ stock, and paid−in surplus C. common​ stock, paid−in ​surplus, and net income D. common​ stock, paid−in ​surplus, and retained earnings

D. common​ stock, paid−in ​surplus, and retained earnings

Which of the following is NOT one of the financial statements that must be produced by a public​ company? A. the balance sheet B. the statement of cash flows C. the income statement D. the statement of activities

D. the statement of activities

Which of the following best describes why a firm produces financial​ statements? A. to show the daily activities a firm has undertaken in the previous financial​ year, and what activities are planned for the near future B. to increase the intrinsic value of a firm C. to use as a tool when planning future investments within a firm D. to provide a means for interested outside parties such as creditors to obtain information about a​ firm, with an overview of the short− and long−term financial condition of a business

D. to provide a means for interested outside parties such as creditors to obtain information about a​ firm, with an overview of the short− and long−term financial condition of a business

In the United​ States, publicly traded companies can choose whether or not they wish to release periodic financial statements. True False

false

The balance sheet shows the​ assets, liabilities, and​ stockholders' equity of a firm over a given length of time. True False

false

What checks are there on the accuracy of these​ statements? ​(Select all the choices that​ apply.) A. Public companies must use a common set of rules and standard format when they prepare their reports. B. Corporations are required to hire a neutral​ party, known as an​ auditor, to check the annual financial​ statements, ensure that the statements are prepared according to GAAP and provide evidence to support the reliability of the information. C. In addition to the​ auditor's role in reviewing the financial​ statements, the​ Sarbanes-Oxley Act requires both the CEO and the CFO to personally attest to the accuracy of the financial statements presented to shareholders and to sign a statement to that effect. D. When an auditor is not​ available, a​ corporation's CFO or the CEO can certify that financial statements are prepared according to GAAP.

A. Public companies must use a common set of rules and standard format when they prepare their reports. B. Corporation are required to hire a neutral party, known as an auditor, to check the annual financial statements, ensure that the statements are prepared according to GAAP and provide evidence to support the reliability of the information. C. In addition to the auditor's role in reviewing the financial statements, the Sarbanes-Oxley Act requires both the CEO and the CFO to personally attest to the accuracy of the financial statements presented to shareholders and to sign a statement to that effect.

What four financial statements can be found in a​ firm's 10-K​ filing? Every public company is required to produce quarterly and annual financial statements. Those statements​ are: ​(Select all the choices that​ apply.) A. The statement of financial position. B. The income statement. C. The statement of cash flows. D. The statement of​ stockholders' equity. E. The statement of​ stockholders' liabilities.

A. The statement of financial position. B. The income statement. C. The statement of cash flows. D. The statement of​ stockholders' equity.

A consensus estimate of future earnings by individuals that are not employees of the firm is known​ as​ ___________ . A. ​analysts' estimates B. investor reactions C. noise trading D. none of these

A. ​analysts' estimates