fin acc ch 5

The income statement for ABC Company shows Gross profit of $144,000; Operating expenses of $130,000; and Cost of goods sold of $216,000. What is net sales revenue?

$360,000 net sales revenue - COGS = gross profit

Which of the following are sections found in a statement of cash flows. (Check all that apply.) Cash Flows from Investing Activities Cash Flows from Indirect Activities Cash Flows from Direct Activities Cash Flows from Operating Activities Cash Flows from Financing Activities

Cash Flows from Investing Activities Cash Flows from Operating Activities Cash Flows from Financing Activities

Dividend payments would be found under Cash Flows from ______ Activities on the ______.

Financing; statement of cash flows

Which of the following are major actors involved in ensuring the integrity of financial statements of a publicly-traded company? (Check all that apply.) Independent Auditors Treasury Department Internal Revenue Service PCAOB SEC Management Board of Directors

Independent Auditors PCAOB SEC management board of directors

Earnings per share (EPS) equals ______ divided by the average shares of common stock outstanding. (Assume no preferred stock has been issued.)

NI

Which line item on the statement of stockholders' equity is also found on the income statement?

NI

Which of the following appears on the statement of stockholders' equity? (Check all that apply.) Net income Common stock Beginning balance of retained earnings Additional paid-in capital Cash received during the accounting period Dividends

Net income Common stock Beginning balance of retained earnings Additional paid-in capital Dividends

Which of the following is not a typical element of a company's annual report? Financial statement notes Press release Auditor's report Management's discussion and analysis

PR

Identify which of the following are nonoperating items on the income statement. (Select all that apply.) Gross profit Provision for income taxes Income tax expense Gains on sale of fixed assets Deferred revenue

Provision for income taxes Income tax expense Gains on sale of fixed assets

Net income divided by average assets equals ______.

ROA

Public companies issuing securities in the United States are required to file a number of detailed financial reports with the ______.

SEC

Which government agency is responsible for the functioning of stock markets in the US?

SEC

SEC stands for the ______.

Securities and Exchange Commission

What is the purpose of the audit report?

To add credibility to the financial statements.

The notes to financial statements may include ______. (Check all that apply.) accounting policies applied relevant information, not disclosed on the statements segment information revenues broken out by geographic region unaudited ratio analysis

accounting policies applied relevant information, not disclosed on the statements segment information revenues broken out by geographic region

Who has primary responsibility for making sure that a company's financial statements follow GAAP? (Check all that apply.)

ceo + cfo

___________ financial statements report financial statement values for the current period and one or more other prior periods.

comparative

__________________ refers to procedures designed to ensure that the company is managed in the interests of the shareholders.

corporate governance

Public companies file their quarterly reports on the SEC's ______.

form 10-Q

To determine how transactions affect ratios, such as the the effect of purchasing land for cash on a company's current ratio, you need to ______.

know the journal entry and its effect on the ratio's numerator and denominator and then evaluate the combined effect

Investors rely on ______ for information needed to make investment decisions.

many sources

Return on assets (ROA) equals ______.

net income divided by average total assets

Press releases and conference calls are used by companies to ______. (Select all that apply.) provide timely information for external users to limit the possibility of selective leakage of information provide cost-benefit constraints announce immaterial disclosures announce quarterly and annual earnings

provide timely information for external users to limit the possibility of selective leakage of information announce quarterly and annual earnings

Accumulated amortization is ______. (2)

similar to depreciation except it is netted against intangible assets instead of tangible assets; a contra-asset account similar to accumulated depreciation

must consist of non-management, independent directors w/ financial knowledge + is responsible for hiring the independent auditors

the audit committee of the board of directors

which report is filed annually and which is filed quarterly with the SEC?

10-K annually, 10-Q quarterly

Revenues were $1,000,000, Cost of Goods Sold was $750,000, and Net Income was $120,000. Net profit margin equals ______.

12%

Which of the following statements are true regarding an annual report and Form 10-K? (Select all that apply.) The annual report includes the four basic financial statements; the Form 10-K does not Both include the four basic financial statements The 10-K includes significantly more information than the annual report The annual report includes significantly more information than the Form 10-K Both include the Report of Independent Accountants (Auditor's Opinion)

Both include the four basic financial statements The 10-K includes significantly more information than the annual report Both include the Report of Independent Accountants (Auditor's Opinion)

Identify various sources of financial information for the investing public. (Select all that apply.) Companies' Websites SEC's EDGAR Service Financial analysts' EDGAR Service Financial analysts' XBRL Service Financial analysts' earnings forecasts

Companies' Websites SEC's EDGAR Service Financial analysts' earnings forecasts

Institutional investors

Control the majority of publicly traded shares of US companies and invest on behalf of many individual investors

______ refers to procedures designed to ensure that the company is managed in the interests of the shareholders.

Corporate governance

Creditors

Include banks, suppliers and other financial institutions that lend money to companies

Who uses accounting information?

Private investors Government Creditors Institutional investors Managers

Who are the external users of accounting information?

Private investors The current and potential creditors Institutional investors (more)

Which of the following are the principal components of the financial disclosures in a Form 10-K? (Select all that apply.) Select summarized financial data for a 5-year period Management's discussion and analysis Financial statements and supplemental data Estimated future stock prices and earnings

Select summarized financial data for a 5-year period Management's discussion and analysis Financial statements and supplemental data

Private investors

Venture capitalists who include the original investors in a company

The SEC's "Fair Disclosure" requires publicly traded companies to provide access to ______.

all important company news

IFRS and US GAAP ______.

are similar but have differences that are currently being resolved with the aim of having one set of standards

Nonoperating items are found _______ on a classified income statement

below Operating Income

The SEC's ______ requires companies provide all investors equal access to all company news and prohibits managers or other insiders from trading shares based on nonpublic information.

fair disclosure

If a company reports Amortization Expense for the period, it must have ______.

intangible assets on its balance sheet

When determining the effect of a transaction on a financial ratio, the steps include ______. (3)

journalize the transaction to see what accounts are affected determine if the accounts affected are included in the financial statement subtotals or totals in the ratio's denominator determine if the accounts affected are included in the financial statement subtotals or totals in the ratio's numerator

Who has primary responsibility for preparing and making sure that a company's financial statements follow GAAP?

management

how to calculate net profit margin

net income divided by revenues

The net profit margin ratio is calculated by dividing net income by ______.

net sales

The ______ in the annual report should be reviewed to determine the significant accounting rules used.

notes

Earnings per share (EPS) appear ______.

on the income statement

The purpose of an independent auditor's report is to ______. (2)

reduce the risk that the company's financial condition is misrepresented in the financial statements provide assurance that the financial statements represent what they claim to represent

A classified income statement is useful to financial statement users because it ______. (Check all that apply.) separates cost of goods sold from other operating expenses, which allows the calculation of gross profit acknowledges various revenue recognition principles presents income statement items in meaningful categories

separates cost of goods sold from other operating expenses, which allows the calculation of gross profit presents income statement items in meaningful categories

IFRS are ______.

the International Financial Reporting Standards

elected by the stockholders and is responsible for ensuring that processes are in place for maintaining the integrity of the company's accounting records.

the board of directors

Voluntary disclosures of financial accounting information, such as press releases, may be issued ______.

to guide market expectations

On the income statement, Operating Income differs from Income before Income Taxes in that ______ are subtracted from Operating Income to arrive at Income before Income Taxes.

transactions that are non-operating or infrequently occurring

True or false: The SEC, FASB, external auditors, and management of companies are involved in ensuring the integrity of financial statements.

true, Many actors are involved in ensuring the integrity of financial statements, not just management.

True or false: Companies listed on US stock exchanges are required to file quarterly financial information with the SEC.

true; Financial information must be filed with the SEC quarterly as well as annually.

True or false: Comparative financial statements include separate columns for more than one period's results.

true; Two or more years of results are reported in comparative financial statements so that comparisons can be made.