POB Unit 6

Which of the following is a key component of managing working capital:

Cash conversion cycle

Which of the following is an example of a current asset

Checking Account

When a fixed asset depreciates, it

decreases in value on the balance sheet.

When return on capital is positive, the company is

growing in value.

A balance sheet shows

how much money a company owes.

Owners' equity may also be called

net worth

A company's current balance of assets and liabilities falls under the focus of

working capital management.

Net Loss

19. On an Income State if the Total Expenses were greater than the Cost of Goods Sold the outcome would be a

Money the business owes is known as

accounts payable.

CCC = 182.5 + 3.9 - 103.4 = 83 days

If DIO = 182.5 days, DSO = 3.9 days, and DPO = 103.4 days, what is the Cash Conversion Cycle?

Money owed to the business is known as

accounts receivable.

The cash conversion cycle should be

as short as possible.

Determining which projects a business should invest in is known as

capital budgeting.

Assets a company already owns and can use to finance a new venture are called

equity.

Finance is the business function that involves managing

money.

The finance function would definitely be involved in a decision regarding

new business projects and strategies.

Accounting is distinct from finance because its main focus is on

recordkeeping activities.

The goals of the finance function are to ensure profitability and to

reduce risks.

The balance sheet is sometimes called the

statement of financial position.

Bookkeeping records business transactions.

24. Which of the following is a true statement:

the accrual method of accounting

25. Accounting records for a business show that the week's total sales revenues were $125,000. Cash sales accounted for $50,000 and credit sales, $75,000. This is an example of

A debit in Assets increases while a debit Liabilities decrease

26. In the Accounting Equation which of the following statements are true

Managers

27. Which of the following groups makes regular use of a business's managerial accounting information:

: Accounting Equation

28. The foundation for accounting; represents the relationship between assets, liabilities, and owners' equity, is known as the

identify trends in the industry

30. Riley is an employee of the federal government who studies the financial reports of major busi-nesses in a specific industry. The government's purpose in assigning this task to Riley is to

control the finances of the business.

31. The overall purpose of accounting is to

applying for a bank loan

32. A creditor is most likely to examine a business's financial accounting records if the business is

Equity

33. Also known as stockholders' (or shareholders') equity, book value, and net worth.

Net Worth = Owner's Equity

34. Which of the following is true

Accrual method

35. What type of accounting method would most likely be used by a large business that has a large number of outstanding loans and customer charge accounts?

Assets, liabilities, owner's equity

37. Which of the following categories of information are found on a balance sheet:

Cash method

38. What type of accounting method would most likely be used by a small business owner who does not offer credit?

1.27 ratio and is desirable

39. What is the Working Capital Ratio, if Current Assets are $350,000 and Current Liabilities are $275,000 and what is does the indicator represent?

Source documents

41. Checks, receipts, invoices, and purchase orders are examples of

To control expenses

42. What is one of the main reasons why businesses need to keep accurate accounting records?

Balance sheets.

43. Businesses use the information collected through the accounting process to prepare accurate:

General Journal

A chronological record of the transactions, showing an explanation of each transaction, the accounts affected, whether those accounts are increased or decreased, and by what amount are the

An accounting device used to analyze transactions is called

T Account

obtaining funds.

The role of finance in business often involves:

Which of the following is a true statement regarding fixed assets

They take longer than a year to convert into cash.

What does an accurate income statement often help a business to identify?

Trouble spots

Protection from theft and fraud

Two employees used a business's computerized accounting system to change some records. They were able to steal $50,000 from the business because the accounting system lacked which of the following:

The information about profit in a business's income statement helps to establish a business's stocks

Value

Income statement

What accounting record would summarize a business's profit or loss for a previous year?

finance.

When businesses invest funds to expand, they are involved in the process of:

Cash Conversion Cycle

Which measures how fast a company can convert cash on hand into even more cash on hand

Cash flow statement

Which of the following financial reports provides estimates of when, where, and how much money will come into and out of a business next year:

It should provide needed information quickly.

Which of the following is a requirement for a good accounting system:

Accounting standards

Which of the following makes comparisons of the financial conditions at multiple organizations possible:

Analyze, journalize, and post

Which of the following presents the first three steps in the accounting cycle in the correct order:

They show the business how it is doing

Why are accurate accounting records important to a business?

A business has $57,500 in Liabilities and $20,000 in Owner's Equity, how much are there in Assets?

$77,500

Rent Payable

21. Which of the following is a Liability?

Balance Sheet

20. A bank denies a business owner's application for credit saying, "We feel that you would be un-able to make the monthly payments because of your other debts." What financial report did the bank review?

Accounting Systems

22. Businesses would not be able to determine if they are meeting their financial goals without accurate:

Retail-type companies

29. Cash Conversion Cycle is most effective with

Which of the following is an example of a short-term liability

Accounts payable

Accounts Receivable

All monies owed to a firm by its customers are

Items of value are listed under which of the following components of the balance sheet

Assets

Accounting Equation

Assets = Liabilities + Owner's Equity

The finance function is usually responsible for which of the following processes:

Budgeting

Which of the following is an example of an asset

Cash

A business that loses items to theft includes those items in which category of the income statement?

Cost of goods sold/Cost of sales

Monitoring the financial status of a business helps the business to decide what to do with

Earned profit

How does the finance function relate to company spending?

It plans and controls spending.

Which of the following are usually responsible for analyzing a business's income statement:

Managers

The "bottom line" in a business's income statement indicates

Net income

Another term for an income statement is a(n)

Operating statement

accounting

The process of keeping the financial records of a business is known as

Cash

Which of the following is an Asset?

Assets = Liabilities + Owners' Equity

23. The formula for the Accounting Equation is

Which of the following is the accounting equation

Assets = Liabilities + Owners' Equity

equity.

Assets a company already owns and can use to finance a new venture are called:

By comparing the categories in an income statement, a business will be able to determine if it is

Spending too much on expenses.

A balance Sheet is sometimes called

Statement of financial position

One of the reasons why an income statement should be as accurate as possible is that businesses use it to develop additional

Financial documents

Which of the following phrases effectively describes a business's income statement:

Financial picture

accurate and up to date.

For an accounting system to be useful to the business, the accounting information it contains must be

What category of an income statement indicates total profit?

Gross profit

Which of the following is a capital investment decision:

How to finance investments

Deduct

In any accounting document, the phrase "Less" means to

Which of the following is the basic calculation used to analyze an income statement:

Income minus expenses

What might a business decide to do after comparing the categories in its income statement?

Increase revenues

One reason why a business compares its income statement figures with those of competitors is to find out how it is doing in relation to

Industry standards

Stockholders monitor a business's income statement because they are the business's

Owners

A business analyzes the information in an income statement by transforming the final numbers into financial

Ratios

One reason why creditors review a business's income statement is to decide if the business will be able to

Repay a loan

Which of the following is a measure of how well a business generates cash flow:

Return on capital

Interest a business earns from its bank accounts is included in which category of the income statement?

Revenue

Businesses often compare the income statement information for several consecutive years to calculate

Sales growth

Which of the following is an example of an expense that a business would include in the operating-expenses category of an income statement:

Shipping charges

Decisions about financing refer to the

acquisition of funds.

The portion of a business's value that belongs to its owners or stockholders is known as

equity.

A business's managers often study a series of past balance sheets to

identify and analyze financial trends within the company.

The finance function ensures that the company's financial goals are

in line with organizational priorities.

The balance sheet has a close relationship with the company's

income statement.

To keep communication flowing with other departments, the finance function depends on

information systems.

All of a business's assets come from two sources—borrowing and/or

investment.

The administration of assets refers to decisions about

investments.

Which user studies a balance sheet to determine if the company will provide a good rate of return

investor