MBA 5850 Ch 5

Accumulated amortization is ______. (Select all that apply.)

**similar to depreciation except it is netted against intangible assets instead of tangible assets a liability and reports the amount owed on mortgages an expense **a contra-asset account similar to accumulated depreciation

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

CFO CEO

What effect does a decrease in research and development (R&D) expense, all of which has been paid, have on the return on assets of 0.2?

Increases it A decrease in expenses, increases net income and the numerator of the ratio. Ending assets will decrease with the payment of the R&D, thus decreasing average total assets and the denominator. However, the impact is greater on the numerator than on the denominator, thus causing the ratio to increase

Who uses accounting information? (Check all that apply.)

Institutional investors Managers Private investors Government Creditors

True or false: When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.

False

Identify various sources of financial information for the investing public. (Select all that apply.)

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

Which of the following are the principal components of the financial disclosures in a Form 10-K? (Select all that apply.)

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

Which of the following are major actors involved in ensuring the integrity of financial statements of a publicly-traded company? (Check all that apply.)

***Management Treasury Department ***Board of Directors ***PCAOB ***SEC Internal Revenue Service ***Independent Auditors

Which of the following would be found under Cash Flows from Investing Activities? (Check all that apply.)

Dividend payments **Sales of productive assets **Purchases of productive assets **Investments in other companies

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?

Net sales revenue - Cost of goods sold = Gross profit. To solve for sales, rearrange the equation as Gross profit + Cost of goods sold = Net sales revenue (= $144,000 + 216,000 = $360,000).

Identify which of the following are nonoperating items on the income statement. (Select all that apply.)

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

Which of the following statements are true regarding an annual report and Form 10-K? (Select all that apply.)

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

When determining the effect of a transaction on a financial ratio, the steps include ______. (Select all that apply.)

determine if the accounts affected are included in the financial statement subtotals or totals in the ratio's denominator 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 numerator

The quality of financial reporting for publicly traded companies is improved through ______. (Check all that apply.)

evaluating and reporting on the effectiveness of internal controls obtaining an external audit

The notes to financial statements may include ______. (Check all that apply.)

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

Lenders or creditors include ______. (Select all that apply.)

suppliers banks commercial credit companies

Which of the following are parts of a Form 10-K? (Select all that apply.)

Auditor reports Financial statements Management's discussion and analysis

ABC Company reports net income of $120,000, sales of $1,200,000, and average total assets of $960,000. The asset turnover is ______.

Asset turnover equals sales divided by average total assets or $1,200,000/$960,000 = 1.25 times. 1.25 times

Earnings per share (EPS) appear ______.

***on the income statement on both the income statement and balance sheet on the statement of stockholders' equity on the balance sheet

The notes to the financial statements typically provide detail support of ______. (Select all that apply.)

**revenues by geographic region future earnings forecasts **business segments **makeup of property, plant and equipment

The decomposition of the ROA into the net profit margin and total asset turnover is referred to as the ______ analysis.

DuPont

Identify which of the following are nonoperating items on the income statement. (Select all that apply.)

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

The SEC requires which of the following of publicly traded companies? (Select all that apply.)

They must have their internal control systems audited by an independent CPA. They must have their financial statements audited by an independent registered public accountant.

Net cash flows provided by operating activities will be ______ when using the direct method compared to the indirect method.

the same