Int. Acct. Ch.1 Pt. 1

Which of the following instances indicate net operating cash flow may not be a good predictor of long-run cash-generating ability? (Select all that apply.)

- a company pays cash to purchase a 2 yr insurance policy - a customer pays for services provided in a prior period

The objectives of financial accounting include (Select all that apply.)

- provide info to investors and creditors - provide info used to evaluate future cash flows

Financial accounting provides investors with information that should help them to evaluate the (Select all that apply.)

-timing of the firm's future cash flow. -uncertainty of the firm's future cash flow. -amounts of the firm's future cash flow.

What is the primary function of financial accounting?

Provide useful information to users external to the business.

What is net operating cash flow?

The difference between cash receipts and cash disbursements from providing goods and services during a period.

True or false: Both profit-oriented companies and not-for-profit companies are providers of financial information.

True

Which of the following models is best in helping predict future cash flows?

accrual accounting

--- basis accounting measures the difference between cash receipts and payments during a reporting period.

cash

The accrual accounting model measures the entity's accomplishments and resource sacrifices during the period regardless of when --- is received or paid.

cash

Net operating cash flow is found in which accounting model?

cash basis

What basis of accounting measures the difference between cash receipts and cash payments from transactions related to providing goods and services to customers during a reporting period?

cash basis

Who are providers of financial info?

companies (profit oriented) , households, and schools (not for profit entities-- charities, and govt entities)

Which of the following forms of business provide shares of stock as an ownership interest?

corporations

What are the three primary forms of business organizations?

corporations, sole proprietorship, and partnership

Under the accrual accounting model, the measure of resources sacrificed is called ---

expense.

True or false: In the United States, we have a free enterprise economy with the majority of productive resources being government owned.

false

True or false: Net operating cash flow is a good indicator of a company's long-run cash-generating ability.

false

The majority of productive resources are privately owned in a ----enterprise economy.

free

In the United States, corporations acquire capital in which of the following ways?

from creditors by borrowing and from investors in exchange for ownership interest

The accrual accounting model is best able to achieve the goal of predicting---- cash flows

future

Capital markets include what entities?

investors and creditors

---- and --- are willing to provide capital to a corporation only if they expect to receive more cash in return at some time in the future.

investors, creditors

External users of a company's financial info include:

labor unions, banks, and credit rating agencies

The difference between revenue and expenses when revenue is greater is called ----

net income

The difference between revenue and expenses when expenses are greater is called ---

net loss

Net --- cash flow is the difference between cash receipts and cash disbursements during a reporting period from transactions related to providing goods and services to customers.

operating

Accrual income attempts to measure the resource inflows and outflows generated by the company's ---- during the reporting period

operations

A corporation's shareholders will receive cash from their investment in which of the following ways?

periodic dividends

Which organizations provide financial information to external users?

profit oriented businesses, and charitable organizations

The capital markets foster an efficient allocation of ---

resources

The accrual accounting model's measure of resources provided by business operations is called ----

revenues

The uncertainty regarding an investment is also referred to as ----

risk

What financial statements are most frequently provided to external users?

statement of shareholders' equity, income statement, statement of cash flows, balance sheet

True or false: Investors expect that if an investment has greater risk, it should also pay a higher return.

true

True or false: Resource inflows and outflows may not correspond to cash inflows and outflows.

true

True or false: The uncertainty of the return on an investment is also referred to as risk.

true