Quiz 2
Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's gross profit is equal to
$1,500,000.
Siskiyou, Inc. has total current assets of $1,200,000; total current liabilities of $500,000; and longminus term assets of $800,000. How much is the firm's Total Liabilities & Equity?
$2,000,000
Which of the following accounts belongs in the liability section of a balance sheet?
Accounts Payable
A company with negative net income will also have negative operating cash flow. T/F?
False
Changes in depreciation expense do not affect operating income because depreciation is a nonminus cash expense. T/F?
False
Commonminussized balance sheets show each account as a percentage of total sales to help analysts in comparing companies of difference sizes. T/F?
False
Commonminussized income statements are used to compare companies that have the same amount of revenues. T/F?
False
Earnings available to common shareholders is equal to a corporation's positive net cash flow over a given period, typically one year. T/F?
False
Generally Accepted Accounting Principles (GAAP) is a set of principleminus based accounting standards established by the Financial Accounting Standards Board (FASB). T/F?
False
The balance sheet equation is Total Assets = Total Revenues - Total Liabilities. T/F?
False
The more debt a company uses to finance its assets, the lower will be its operating income due to higher interest expense. T/F?
False
Which of the following statements about Generally Accepted Accounting Principles (GAAP) is NOT true?
GAAP sets out the standards, conventions, and rules that accountants must follow when preparing audited financial statements. AND GAAP is a set of ruleminus based accounting standards established by the Financial Accounting Standards Board (FASB). AND GAAP is complex, providing more than 150 "pronouncements" as to how to account for different types of transactions.
An income statement may be represented as follows:
Sales- Expenses = Profits.
A balance sheet is a statement of the financial position of the firm on a given date, including its asset holdings, liabilities, and equity. T/F?
True
In the United States, financial statements are prepared following the Financial Accounting Standards Board's generally accepted accounting principles (GAAP). T/F?
True
International Financial Reporting Standards (IFRS) is a set of principleminus based accounting standards that were established by the International Accounting Standards Board (IASB). T/F?
True
Profits-toSales relationships are defined as profit margins. T/F?
True
The balance sheet reflects the accounting equation: Assets = Liabilities + Owners' Equity. T/F?
True
The statement of cash flow explains the changes that took place in the firm's cash balance over the period of interest. T/F?
True
What information does a firm's statement of cash flows provide to the viewing public?
a report documenting a firm's cash inflows and cash outflows from operating, financing, and investing activities for a defined period of time
Which of the following accounts does NOT belong on the asset side of a balance sheet?
accruals
All of the following are income statement items EXCEPT
accrued expenses
All of the following statements about balance sheets are true EXCEPT
balance sheets show average asset balances over a one-year period.
Which of the following accounts does NOT belong on the asset side of a balance sheet?
common stock
Which of the following represents an attempt to measure the net results of the firm's operations (revenues versus expenses) over a given time period?
income statement
Which of the following accounts does NOT belong in the equity section of a balance sheet?
long-term debt
The increase in owners' equity for a given period is equal to
net income minus dividends
Examples of uses of cash include
paying cash dividends to stockholders
What financial statement explains the changes that took place in the firm's cash balance over a period?
statement of cash flow
The A corporation has an operating profit margin of 20%, operating expenses of $500,000, and financing costs of $15,000. Therefore,
the corporation's gross profit margin is greater than 20%.
Universal Financial, Inc. has total current assets of $1,200,000; longminus term debt of $600,000; total current liabilities of $500,000; and longminus term assets of $800,000. How much is the firm's net working capital?
$700,000
California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. What is California Retailing's EBIT?
$900,000
Siskiyou, Inc. has total current assets of $1,200,000; total current liabilities of $500,000; longminus term assets of $800,000; and longminus term debt of $600,000. How much is the firm's total equity?
$900,000
Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's net profit margin is equal to
25.67%
Two companies have identical assets and operating activities. Which of the follow statements is true?
The company with more debt will have lower net income due to interest expense.