MGMT 159 - Ch 17 SmartBook

ratios tell us how effectively management is turning over inventory.

Activity

are economic resources owned by a firm.

Assets

What are four main types of financial ratios used in ratio analysis?

Debt ratios, Liquidity ratios, Profitability ratios, Activity ratios

True or false: Financial accounting provides information to people inside of an organization, whereas managerial accounting provides information to people outside of an organization.

False

True or false: The income statement shows a summary of money coming into and going out of a firm.

False

accounting generates financial information for people outside the firm, while accounting generates financial information for people inside the firm.

Financial, managerial

How do cash flow problems usually start?

The firm uses up its credit.

Assets, liabilities, and owners' equity are the major accounts listed on ______.

a balance sheet

The income statement shows:

a firm's profit (or loss) after costs, expenses, and taxes

The relationship among assets, liabilities, and owners' equity is a fundamental concept in accounting known as the Blank______ equation.

accounting

Through the recording, classifying, summarizing, and interpretation of financial events in an organization, the function of Blank______ helps managers make good decisions about the firm's operations.

accounting

What is considered to be the "language of business"?

accounting

If financial management is the heartbeat of competitive businesses, what keeps that heartbeat stable?

accounting information

The ratios that measure the effectiveness of a firm's management in turning over inventory are called ______.

activity ratios

The first step in the accounting cycle is to Blank______.

analyze source documents

Items of value owned by a firm are called Blank______.

assets

Reviewing and evaluating records used to prepare a company's financial statements is referred to as Blank______.

auditing

The financial statement that shows what a company owns and owes as of a particular date is called a(n) Blank______.

balance sheet

The Blank______ reports a firm's financial condition on a specific date, whereas the Blank______ summarizes revenues, costs, and expenses for a specific period.

balance sheet; income statement

The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding Blank______.

business operations

It's possible for a business to increase its sales and profits yet still suffer flow problems.

cash

A statement of provides a summary of money coming into and going out of the firm.

cash, flows

A summary of all the financial transactions that have occurred over a particular period is referred to as a Blank______.

financial statement

Because they indicate a firm's financial health and stability, the use of Blank______ are key factors in management decision making.

financial statements

The best way to understand a firm's financial health and stability is to look at its Blank______.

financial statements

What are the three major activities of a firm shown on the statement of cash flows?

financing, operations, investments

Long-term assets like land, buildings, and equipment are referred to as assets.

fixed

What type of assets are land, buildings, and equipment?

fixed assets

The statement summarizes profit (or loss), costs, and expenses over a specific period, which may be a week, a month, or a year.

income

By its very design, the Blank______ offers one of the clearest possible pictures of the company's overall revenues and the costs incurred in generating those revenues.

income statement

Which financial statement shows a firm's bottom line—its profit (or loss) after costs, expenses, and taxes for a specific period?

income statement

Which financial statement shows the firm's profit (or loss) after costs, expenses, and taxes?

income statement

The major activities of a firm shown on the statement of cash flows include operations, , and financing.

investments

Which three components make up the fundamental accounting equation?

liabilities, assets, owners' equity

The debt a firm owes to others is called a(n) Blank______.

liability

What are the three major categories shown on an income statement?

net income, revenue, operating expenses

In the accounting equation, what is the term for the difference between assets and liabilities?

owners' equity

The value of what stockholders own in a firm minus any liabilities is called Blank______.

owners' equity

What are the three major categories on the balance sheet?

owners' equity, liabilities, assets

Financial accounting and managerial accounting differ in terms of who uses the information. Financial accounting provides information primarily for Blank______.

people outside the organization

The formula for the costs of goods sold is Blank______.

purchase price + freight charges + storage costs

The assessment of a firm's financial condition and performance through calculations and interpretation of financial ratios developed from the firm's financial statements is called analysis.

ratio

Calculating and interpreting financial ratios developed from the firm's financial statements is called:

ratio analysis

Which are steps in the accounting cycle? (Select all that apply)

record transaction in the journal, prepare a trial balance, analyze transactions

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called Blank______.

return on equity

What is the term for the monetary value of all resources that come into the firm from operating activities?

revenue

The role of an auditor is to Blank______.

review and evaluate a company's financial information

Cash flow analysis is especially important for which of the following?

small businesses

The three major activities of operations, investments, and financing are included on which financial statement?

statement of cash flows

Which of the following provides a summary of money coming into and going out of the firm that tracks a company's cash receipts and payments?

statement of cash flows

Which report provides a summary of money coming into and going out of the firm?

statement of cash flows

Stockholders', or owners' equity represents Blank______.

the value of the business that belongs to owners

Return on equity is net income minus taxes divided by ______.

total owners' equity

Operating expenses include which of the following?

utilities, rent, supplies

In using the accounting equation, if assets = $40,000 and liabilities = $30,000, then owner's equity is equal to Blank______.

$10,000