Multiple Choice Questions
1.The balance sheet communicates
a.proof to the investor that the company is profitable.
b. assets, liabilities, and shareholders’ equity with all transactions reflected through the year.
c. assets, liabilities, and shareholders’ equity as of a certain date.
d. operating, investing, and financing activities.
2.The income statement communicates
a. assets, liabilities, and shareholders’ equity as of a certain date.
b. how much cash the owner received during the period.
c. information about dividends the company paid to its owners.
d. revenues less expenses during a period of time.
3.Who prepares financial reports for a particular company?
a.The Securities and Exchange Commission
b.The Board of Directors
c.The company’s management
d.The company’s auditors
4.To run a company effectively, which one of the following might be a source from which management might acquire capital?
a.Customers
b.FASB
c.Debt and equity investors
d.Auditors
5.Considering and understanding how business decisions affect the financial statements is
a.the sole responsibility of the Securities and Exchange Commission.
b.provided in the auditor’s report.
c.referred to as an economic consequence perspective.
d.interpreted strictly by the company’s suppliers.
6.A Certified Public Accountant
a.reviews every transaction that a company conducts during any given year.
b.performs a company’s audit.
c.is one of the investors of a company.
d.is responsible for the preparation and integrity of a company’s financial statements.
7.Footnotes to financial statements
a.more fully explain certain items in the financial statements.
b.reflect financial notes personalized by the company’s executive team.
c.show the detail of salaries of every employee.
d.justify fraudulent business practices.
8.An internal control system
a.is maintained to ensure that transactions of a company are properly recorded and reported and the assets are safeguarded.
b.is included in the set of footnotes to the financial statements.
c.is an estimate of the profits a company expects to earn in the future.
d.measures how much control management has over its staff.
9.Where would you find information on the amount of net income for the year?
a.Factory production reports on units produced
b.Auditor’s report
c.Income statement
d.Internal Revenue Service
10.The statement of cash flows communicates
a. assets, liabilities, and owners’ equity at a point of time.
b. operating, investing, and financing activities.
c. beginning balance plus income less dividends.
d. how much cash the company owes its employees.