CH.17 Business
Operating expenses include which of the following?
Supplies rent utilities
It's possible for a business to increase is sales and profits yet still suffer _______ problems.
cash flow
Which of the following has the highest liquidity?
current assets
Net income after taxes divided by the number of common stock shares outstanding is called
earnings per share
Revenue minus costs of goods sold is called
gross profit
A major purpose of accounting is to help internal _______ make well-informed decisions.
managers
Rent, salaries, supplies, utilities, and insurance are examples of ________ expense that are general expenses.
operating
Net income or meet loss is the difference between:
revenues and expenses
Cash receipts and disbursements related to operations, investments, and financing a reported on the:
statement of cash flows
Revenue is the monetary value of what a firm received for:
- goods sold -services rendered -interest earned
On a balance sheet, assets may include
- intangible earnings - tangible earnings
Which of the following would be shown on an income statement?
- revenue -net income -operating expenses
Common financial transactions include:
-acquiring insurance -buying and selling goods -paying employees
The major activities of a firm include operations,________, and financing.
investments
A _____ is a record book or computer program where accounting data are first entered.
journal
Transactions that are entered in the journal are then posted to specific categories in a(n)
ledger
What type of ratios measure the degree to which a firm relies on borrowed funds in its operations?
leverage
Debts, known for accounting purposes as
liabilities
Stockholders equity is the value of what stockholders' own in a firm minus _____
liabilities
_____ ratios measure a company's ability to turn assets into cash to pay its short-term debt.
liquidity
Which of the following would be shown on an income statement?
net income revenue operating expenses
Gross profit is:
net sales minus cost of goods sold
accounting is needed for ______ organizations as well as for profit-seeking firms.
nonprofit
______ ratios measure how effectively a firm is using its various resources to achieve profits.
profibility
Earnings per share, return on sales, and return on equity are all examples of ratios.
profitability
Which of the following provides a summary of money coming into and going out of the firm?
statement of cash flows
The major categories on the balance sheet include which of the following?
- owners equity - liabilities - assets
What are the main types of financial ratios used in ratio analysis?
- profitability ratios -activity ratios -liquidity ratios - debt ratios
Bookkeeping involves the ________ of business transactions, whereas ______ classify and summarize financial data provided by bookkeepers.
- recording -accountants
________ are economic resources owned by a firm.
assets
The fundamental accounting equation is the basis for the:
balance sheet
The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding:
business operations
Business that are not Incorporated identify the investment of the sole proprietor through the ________ account.
capital
What identifies the investments of the store proprietor in a businesses that are not Incorporated?
capital account
Accounting reports and ______ ________ are critical to understanding the health of a business.
financial statements
Management decision making is based on a firm's financial health and stability which are shown on the
financial statements
Arthur Andersen was convicted of obstruction of justice for______ records in the Enron case.
shredding
If a firm has cash of $50,000, current assets of $500,000, and current liabilities of 200,000, what is the current ratio?
2.50
What is a term given to specialized accounting book or computer programs in which information is transferred into specific categories, so managers can find all the information about a single account in one place?
Ledger
What are retained earnings?
accumulated earnings not paid out to stockholders
Ratios used to measure the effectiveness of management in utilizing the assets that are available are called
activity ratios
A balance sheet reports on:
a firm's financial status on a specific date
Return on Sales is:
net income divided by net sales
The bottom line is another name for:
net income or loss
Which of the following is considered to be a part of accounting?
- recording financial transactions -interpreting financial transactions -classifying financial transactions
Stakeholders who want to look at detailed financial information on the financial condition, progress, and expectations of a company will look at
an annual report
Which financial statement shows a firm's profit after cost, expenses, and taxes?
income statement
Which financial statement's purpose is to reveal whether a business is earning a profit of losing money?
income statement
The ______ statement shows all of a firms revenues, cost, and whether it made a profit or loss during a specific period.
income
The ______ _______ summarizes revenues, costs, and expenses over a specific., which may be a week, a month, or a year.
income statement
How many entries are required for each transaction in the ledgers?
two
The principles, define by FASB, that accountants must follow to ensure that a firm's accounting information is accurate are abbreviated as:
GAAP
Computerized _____ programs post information from journals instantaneously so that financial information is readily available.
accounting
Net income is:
all revenue minus all expenses and taxes
Which ratio is the cost of goods sold divided by the average inventory?
the inventory turnover ratio
Return on equity is net income minus taxes divided by:
total owner's equity
A journal is the place where:
transactions are first recorded
Before preparing the balance sheet, information from account ledgers is is summarized in the
trial balance
The formula for the costs of goods sold is:
purchase price plus freight charges plus storage costs
What are some benefits of using computers for accounting purposes?
- software can help if no strong accounting support is available. -information can be posted from journals instantaneously -computers can handle large amounts of financial information.
The method a company uses to record and summarize accounting data into reports is a (n)
accounting system