BA 1500 Accounting and financial statements

Who of the following might be the most interested in a company's liquidity ratios?

A supplier who bills monthly for manufacturing materials

Classification (step 3 of accounting process)

Creating an accounting ledger Organize journal entries in categories within a ledger

Recording (step 2 of accounting process)

Creating journal entries Log daily transactions in journals

Items that a business owns that can be converted into cash within one year are called ______.

Current assets

On a balance sheet, the value of a firm if its assets were sold and its debts paid is called owners' _____________.

Equity

Assets

Items of value owned by the business

Summarization (step 4 of accounting process)

Running a trial balance Test the accuracy of the ledger

Liquidity ratios measure a company's ability to meet __________ financial obligations.

Short-term

By reviewing the line items on an income statement, the owner of a company can learn which of the following? More than one answer may be correct. Liabilities Assets Operating expenses Net income

Operating expenses Net income

Anything that a firm owns is known as ____.

an asset

Items such as inventory and accounts receivable, which can be converted into cash within one year, are called _____________ assets.

current

A debt that the firm owes to a person or organization outside the company is called a(n) _______.

liabilities

Debts that the firm owes to outside individuals and organizations are known as ______.

liabilities

Collection (step 1 of accounting process)

Finding unorganized business transaction records Locate and sort records

Reporting (step 5 of accounting process)

Issuing financial statements

Which role(s) do accountants play in a business organization?

They prepare budgets and check compliance or deviation. They record financial information and ensure its accuracy.

Items that are relatively permanent and meant to be used over a long period of time, such as equipment, land, buildings, furniture, and fixtures, are called ___________ assets

fixed

Owners' equity

the value of a firm if its assets were sold and its debts paid

Select all the sources of income that are commonly listed as line items in a cash flow statement. Financing activities Legal activities Operating activities Investing activities

Financing activities Operating activities Investing activities

Debt to owner's equity ratios

How dependent is the company on borrowed funds?

Activity ratios

How well does your company generate income?

Which financial ratio best shows whether a business has taken on too much debt?

Debt to owners' equity ratio

When accountants analyze items in a balance sheet, what do they obtain that is helpful for managing a business?

Financial ratios that indicate the company's performance

Profitability ratios

How high are profits

Another name for activity ratios is ______ ratios

efficiency

The ease with which an asset can be converted into cash is called __________.

liquidity

What is the defining characteristic of current assets?

They are liquid

What is the purpose of the accounting equation?

To calculate what a company is worth

Liquidity ratios

How well can your company pay its debts?

Select all the options that describe problems that may occur if a company's debt to owners' equity ratio is too high? The company may have too much inventory. The company may not be able to pay its bills. The company may not be able to pay stock dividends. The company may have difficulty borrowing additional funds.

The company may not be able to pay its bills. The company may not be able to pay stock dividends. The company may have difficulty borrowing additional funds.

Place the items that appear on a balance sheet in the order in which they must appear, starting with the first at the top.

1. current assets 2. fixed assets 3. intangible assets 4. current liabilities 5. long-term liabilities 6. owners equity

Liabilities

Debts owed by the company

What is the difference between managerial and financial accounting?

Managerial accounting prepares information for people inside the company, whereas financial accounting prepares information for people outside the company.

What is the purpose of activity ratios?

To evaluate how well a company converts assets into income

Land, buildings, cash, patents, supplies, and other things of value that a company owns are called _______.

assets

What are the four characteristics of financial statements, according to the Generally Accepted Accounting Principles (GAAP)?

Relevant, reliable, consistent, and comparable

What is the difference between assets and liabilities?

Assets are what the company owns, while liabilities are debts the company owes.

Which of the following statements about business accounting are true? Accounting helps assess whether a given company will be a profitable investment. Accounting is not useful to anyone other than accountants in business organizations. A company's accounting has little value to its suppliers. Accounting helps government agencies assess a company's liabilities and compliance.

Accounting helps assess whether a given company will be a profitable investment. Accounting helps government agencies assess a company's liabilities and compliance.

On a balance sheet, what items are relatively permanent and meant to be used over a long period of time, such as land, buildings, equipment, furniture, and fixtures?

Fixed assets

What is the relationship between fixed assets and liquidity?

Fixed assets are not easily converted into cash; they are relatively permanent and tend to be held for a long time.

What is the difference between fixed assets and intangible assets?

Fixed assets are physical objects, while intangible assets are not.

What is liquidity?

The ease with which an asset can be converted into cash

Who of the following might be the most interested in a company's liquidity ratios? - A customer who wants to ensure that the company's products are of good quality - A supplier who bills monthly for manufacturing materials - A stock manager who wants to learn more about product turnover. - The bank that holds the mortgage on the company's building

A supplier who bills monthly for manufacturing materials

Which kind of financial ratio indicates how well a company brings in money?

Activity ratios

Jordan's retail outlet owns the company's furniture, office supplies, inventory of products, and the land and building where the business is located. In what section of a balance sheet would those items be listed?

Assets

Select all the factors that are used in calculating profitability ratios. Assets Owners' equity Sales Inventory losses

Assets Owners' equity Sales

Which of these is the accounting equation? Owners' equity = company stock + fixed assets Accounts receivable = net income − prepaid expenses Current liabilities = long-term liabilities + notes payable Assets = liabilities + owners' equity

Assets = liabilities + owners' equity

What financial statement displays a company's assets, liabilities, and owners' equity? Profit-and-loss statement Income statement Cash flow statement Balance sheet

Balance sheet

What term is used to describe the last line item in a cash flow statement, which combines the amount of cash received and the amount paid out? Cash from operating activities Cash from financing activities Cash balance

Cash balance

Analysis (step 6 of accounting process)

Conducting a ratio analysis Assess the firm's financial condition

According to the Generally Accepted Accounting Principles (GAAP), what are the characteristics of financial statements?

Consistent Comparable Relevant Reliable

Which are line items shown on an income statement? Cost of goods sold Gross sales Owners' equity Operating expenses

Cost of goods sold Gross sales Operating expenses

What is the difference between current assets and fixed assets

Current assets can be converted into cash within one year, while fixed assets are more permanent and are usually held for a long time.

Something that has value but is not a physical object, such as a patent or trademark, is called a(n) ____________ asset.

Intangible

What part of a balance sheet would list patents, trademarks, and other valuables that are not physical objects?

Intangible assets

What are characteristics of a balance sheet? More than one answer may be correct. It projects the company's expected earnings for the next few years. It contains an examination of the overall health of the business. It reports a company's financial condition at a specific time. It displays the company's bank balances for each month of the year

It contains an examination of the overall health of the business. It reports a company's financial condition at a specific time.

The value of a firm if its assets were sold and its debts paid is called ______.

Owners equity

Irina has determined that as of September 30, her firm had $2,000 in retained earnings and $25,000 in common stock. In what section of the company's balance sheet would that data be listed?

Owners' equity

What is the main difference between assets and owners' equity?

Owners' equity considers value as if debts were paid.

Managerial

Preparing and monitoring department and company-wide budgets Analyzing the costs of production and marketing

Financial

Preparing information and analyses for people outside the company Preparing and filing documents for government agencies

Which financial ratios use sales, assets, or owners' equity to determine how well a business is doing?

Profitability ratios