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
