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A comprehensive overview of key financial accounting ratios and concepts, including liquidity, profitability, asset management, leverage, and financial statements. It includes definitions, explanations, and examples of each ratio, along with practice exercises to reinforce understanding. Particularly useful for students studying financial accounting and those seeking to gain a deeper understanding of financial analysis.
Typology: Exams
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Current II!Ratio II!(Liquidity) Whether II!company II!is II!liquid II!enough II!to II!be II!able II!to II!pay II!its II!short-term II!debts. II!-II! II!Correct II!Answers II! II! II! II!Current II!Assets/Current II!Liabilities II!Quick II!Ratio II!aka II!Acid II!Test II!(Liquidity) A II!more II!conservativeII!measure II!of II!liquidity. II!- II! II!Correct II!Answers II! II! II! II!(cash II!+ II!ST II!investments II!+ II!AR II!)/Current II!Liabilities II!Gross II!Margin II!on II!Sales II!(Profitability) The II!excess II!of II!a II!product's II!selling II!price II!over II!cost, II!which II!is II!what II!the II!company II!has II!left II!to II!coverall II!remaining II!expenses II!and II!still II!make II!a II!profit. II!- II! II!Correct II!Answers II! II! II! II!Gross II!Margin/Net II!Sales II!Profit II!Margin II!on II!Sales II!(Profitability) The II!% II!of II!net II!sales II!that II!represents II!profit. II!- II! II!Correct II!Answers II! II! II! II!Net II!Income/Net II!Sales II!Return II!on II!Assets II!(Profitability) The II!amount II!of II!income II!beingII!generated II!by II!the II!company"s II!assets. II!- II! II!Correct II!Answers II! II! II! II!Net II!Income/Avg II!Total II!Assets
II!Return II!on II!Equity II!(Profitability) The II!amount II!of II!income II!beingII!germinated II!by II!the II!stockholders' II!investments II!- II! II!Correct II!Answers II! II! II! II!Net II!Income/Avg II!Stockholders' II!Equity II!EarningsII!per II!Share II!(Profitability) The II!earnings II!associated II!with II!one II!share II!of II!common II!stock; II!the II!only II!ratio II!required II!by II!GAAPII!to II!be II!presented II!with II!the II!financial II!statements. II!- II! II!Correct II!Answers II! II! II! II!(Net II!Income II!- II!Preferred II!Dividends)/Weighted II!Avg II!# II!shares II!common II!outstanding II!Dividend II!Payout II!Ratio II!(Profitability) How II!much II!of II!the II!company's II!earnings II!are II!distributed II!toII!the II!common II!stockholders. II!- II! II!Correct II!Answers II! II! II! II!Cash II!Dividends II!Paid/(Net II!Income II!- II!Preferred II!Dividends) II!Price-Earnings II!Ratio II!(Profitability) How II!much II!the II!earnings II!of II!the II!company II!cost II!an II!investor II!- II! II!Correct II!Answers II! II! II! II!Mkt II!Price II!per II!Share/EPS II!Day II!Sales II!Outstanding II!(Asset II!Management) On II!avg., II!how II!long II!it II!takes II!the II!company II!to II!collect II!its II!AR II!from II!customers. II!- II! II!Correct II!Answers II! II! II! II!(ARII!x II!365)/Net II!Sales II!Accounts II!ReceivableII!Turnover II!(Asset II!Management) How II!many II!times II!in II!the II!period II!the II!company II!collects II!it II!AR II!- II! II!Correct II!Answers II! II! II! II!Net II!Sales/Avg. II!AR II!Inventory II!Turnover II!(Asset II!Management)
Long-term II!Debt II!Debits II!(Left) II!and II!Credits II!(Right) II!- II! II!Correct II!Answers II! II! II! II!Debits-increase II!asset II!and II!expenseII!accounts II!and II!decrease II!liability II!and II!revenue II!accounts Credits-increase II!liability II!and II!revenue II!accounts II!and II!decrease II!asset II!and II!expense II!accounts II!Relationship II!between II!Balance II!Sheet II!& II!Income II!Statement II!- II! II!Correct II!Answers II! II! II! II!Net II!income II!from II!the II!Income II!Statement II!that II!isn't II!paid II!out II!as II!a II!dividend II!becomes II!Retained II!Earnings II!on II!the II!Balance II!Sheet II!Time II!Value II!of II!Money II!(TVM) II!- II! II!Correct II!Answers II! II! II! II!Money II!today II!is II!worth II!more II!than II!money II!in II!the II!future II!due II!to II!its II!potential II!earning II!capacity II!Future II!Value II!(FV) II!-II! II!Correct II!Answers II! II! II! II!The II!valueII!of II!cashII!at II!a II!specified II!date II!inII!the II!future II!that II!is II!equal II!in II!value II!to II!a II!specified II!sum II!today Simple-II!Org II!investment II!x II!(1+(int II!rt II!x II!#yrs)) Compound-Org II!investment II!x II!((1+int II!rt)^#yrs) II!Present II!Value II!(PV) II!- II! II!Correct II!Answers II! II! II! II!The II!current II!worth II!of II!a II!future II!sum II!of II!money II!given II!aII!specified II!rate II!of II!return. II!Future II!cash II!flows II!are II!discounted II!at II!the II!discount II!rate. II!The II!higher II!the II!discount II!rate II!the II!lower II!the II!present II!value II!Net II!Present II!Value II!(NPV) II!- II! II!Correct II!Answers II! II! II! II!The II!difference II!between II!the II!PV II!of II!cash II!inflows II!and II!the II!PV II!of II!cash II!outflows. II!Used II!in II!capital II!budgeting II!to II!analyze II!profitability. II!Accretion II!- II! II!Correct II!Answers II! II! II! II!Asset II!growth II!through II!addition II!or II!expansion. II!Can II!occur II!through II!internal II!development II!or II!M/A II!Amortization II!- II! II!Correct II!Answers II! II! II! II!Paying II!of II!a II!debt II!in II!regular II!installments II!over II!aII!period II!of II!time. II!Also, II!the II!deduction II!of II!capital II!expenses II!over II!aII!specific II!period II!of II!time. II!This II!method II!measures II!the II!consumption II!of II!the II!value II!of II!intangibleII!assets II!like II!patents II!and II!copyrights
II!What II!are II!the II!three II!distinct II!areas II!business II!activity II!is II!divided II!into II!on II!the II!Statement II!of II!Cash II!Flows? II!- II! II!Correct II!Answers II! II! II! II!Operating, II!Investing, II!Financing II!Statement II!of II!Cash II!Flows II!- II! II!Correct II!Answers II! II! II! II!reports II!cash II!inflows II!and II!outflows II!during II!an II!accounting II!period. II!Financing II!Activities II!-II! II!Correct II!Answers II! II! II! II!transactions II!that II!involve II!stockholders II!and II!creditors, II!such II!as II!receiving II!common II!stock II!investments, II!paying II!off II!loans, II!and II!paying II!dividends. II!Investing II!Activities II!- II! II!Correct II!Answers II! II! II! II!spendingII!funds II!on II!revenue II!generating II!assets, II!such II!as II!PPE II!Operating II!Activities II!- II! II!Correct II!Answers II! II! II! II!cash II!inflows II!and II!outflows II!from II!a II!company's II!central II!business, II!such II!as II!receipts II!from II!customers II!and II!payments II!to II!suppliers II!and II!employees. II!Operating II!Activities II!Cash II!Inflow II!Examples II!- II! II!Correct II!Answers II! II! II! II!Cash II!from II!customers, II!cash II!from II!interest II!and II!dividends, II!Operating II!Activities II!Cash II!Outflow II!Examples II!- II! II!Correct II!Answers II! II! II! II!Cash II!Paid II!to II!Suppliers, II!interest II!paid, II!other II!operating II!cashII!payments II!Investing II!Activities II!Cash II!Inflows II!Examples II!- II! II!Correct II!Answers II! II! II! II!Sell II!PPE, II!Sell II!investment II!securities, II!recieve II!loan II!payments. II!Investing II!Activities II!Cash II!Outflows II!Examples II!- II! II!Correct II!Answers II! II! II! II!Purchase II!PPE, II!Purchase II!securities, II!make II!loans. II!Financing II!Activities II!Cash II!Inflows II!Example II!- II! II!Correct II!Answers II! II! II! II!borrow II!cash II!from II!creditors, II!issue II!debt II!securities(bonds), II!issue II!equity II!securities(capital II!stock). II!Financing II!Activities II!Cash II!Outflows II!Example II!- II! II!Correct II!Answers II! II! II! II!repay II!amounts II!borrowed, II!repurchase II!equity II!shares, II!pay II!cash II!dividends.
II!Capital II!Expenditures II!- II! II!Correct II!Answers II! II! II! II!new II!land, II!land II!improvements, II!buildings, II!etc... II!Free II!Cash II!Flows II!- II! II!Correct II!Answers II! II! II! II!amount II!of II!cash II!available II!for II!business II!activities II!afterII!allowances II!for II!investing II!and II!financing II!activity II!requirements II!to II!maintain II!productive II!capacity II!at II!current II!levels. II!Free II!Cash II!Flow II!= II!? II!-II! II!Correct II!Answers II! II! II! II!NCOA II!- II!(Capital II!Expenditures II!+ II!DividendsII!Paid) II!Statement II!of II!Stockholders II!Equity II!- II! II!Correct II!Answers II! II! II! II!provides II!information II!about II!changes II!in II!a II!company's II!stockholders II!equity, II!including II!contributed II!capital II!and II!retained II!earnings. II!Retained II!Earnings II!- II! II!Correct II!Answers II! II! II! II!Net II!Income II!earned II!by II!the II!compay II!since II!its II!incorporation II!and II!not II!yet II!distributed II!as II!dividends. II!Net II!IncomeII!increases II!retained II!earnings II!and II!dividends II!decreases II!retained II!earnings. II!If II!a II!company II!incurs II!a II!net II!loss, II!it II!is II!treated II!as II!negative II!net II!income, II!a II!reduction II!in II!Retained II!Earnings. II!Certificate II!of II!Deposit II!- II! II!Correct II!Answers II! II! II! II!a II!savings II!ccertificate II!entitling II!the II!bearer II!to II!receive II!interest. II!A II!CD II!bears II!a II!maturity II!date, II!a II!specified II!fixed II!interest II!rate II!and II!can II!be II!issued II!in II!any II!denomination. II!CDS II!are II!generallyII!issued II!by II!commercial II!banks II!and II!are II!insured II!by II!the II!FDIC. II!Term II!ranges II!from II! 1 II!month II!- II!five II!years. II!profit II!- II! II!Correct II!Answers II! II! II! II!revenue II!in II!excess II!of II!expenses II!- II!money II!in II!is II!more II!than II!money II!out II!loss II!- II! II!Correct II!Answers II! II! II! II!expenses II!in II!excess II!of II!revenue II!- II!money II!out II!isII!more II!than II!money II!in II!asset II!- II! II!Correct II!Answers II! II! II! II!anything II!of II!value II!used II!by II!aII!business II!current II!assets II!- II! II!Correct II!Answers II! II! II! II!assets II!of II!aII!business II!that II!would II!be II!used II!within II!a II!year II!- II!for II!a II!bank, II!cash, II!short II!term II!receivables, II!and II!marketable II!securities. II!current II!liabilities II!- II! II!Correct II!Answers II! II! II! II!obligations II!owed II!by II!the II!business II!due II!within II!a II!year II!- II!for II!aII!bank, II!demand II!deposits II!liability II!- II! II!Correct II!Answers II! II! II! II!an II!obligation II!owed II!by II!a II!business
II!spread II!- II! II!Correct II!Answers II! II! II! II!the II!difference II!between II!the II!interest II!received II!from II!lending II!and II!the II!interest II!paid II!to II!depositors II!captial II!adequacy II!- II! II!Correct II!Answers II! II! II! II!measure II!of II!the II!sufficiency II!of II!a II!firm's II!funds II!to II!meet II!its II!business II!and II!regulatory II!obligations II!financial II!ratio II!- II! II!Correct II!Answers II! II! II! II!a II!method II!of II!evaluating II!a II!firm's II!financial II!position II!mortgage II!payable II!- II! II!Correct II!Answers II! II! II! II!Which II!one II!of II!the II!following II!is II!generally II!not II!considered II!a II!current II!liability? II!purchased II!goodwill II!- II! II!Correct II!Answers II! II! II! II!Which II!one II!of II!the II!following II!is II!generally II!considered II!an II!intangible II!asset? II!an II!expense II!- II! II!Correct II!Answers II! II! II! II!Zeta II!Incorporated II!paid II!three II!months' II!rent II!in II!advance II!on II!its II!new II!store. II!At II!the II!beginning II!of II!the II!next II!month, II!one II!month's II!rent II!must II!be II!recorded II!as: II!allowance II!for II!bad II!debts II!- II! II!Correct II!Answers II! II! II! II!To II!a II!bank, II!the II!allowance II!for II!loan II!and II!leaseII!losses II!account II!is II!similar II!to: II!depreciation II!- II! II!Correct II!Answers II! II! II! II!allocates II!the II!cost II!of II!an II!asset II!over II!its II!useful II!life II!store II!display II!costs II!- II! II!Correct II!Answers II! II! II! II!General II!and II!administrative II!expenses II!on II!the II!income II!statement II!generallyII!do II!not II!include II!which II!of II!the II!following? II!revenues II!minus II!extraordinary II!items II!- II! II!Correct II!Answers II! II! II! II!Gross II!profit II!is II!calculated II!as: II!the II!total II!assets II!and II!the II!net II!income II!at II!the II!end II!of II!the II!year II!- II! II!Correct II!Answers II! II! II! II!Which II!of II!the II!following II!pieces II!of II!information II!do II!you II!need II!to II!know II!to II!calculate II!the II!return II!on II!assets II!for II!the II!year? II!contingent II!liabilities II!- II! II!Correct II!Answers II! II! II! II!Possible II!future II!claims II!against II!a II!business II!are:
II!growth II!in II!inventory II!caused II!byII!an II!increase II!in II!inventory II!days II!on II!hand II!- II! II!Correct II!Answers II! II! II! II!A II!major II!reason II!for II!business II!borrowing II!is: II!balance II!sheet II!- II! II!Correct II!Answers II! II! II! II!Current II!liabilities II!appear II!on II!the II!company's II!short II!term II!debts, II!accounts II!payable, II!accrued II!liabilities II!(wages, II!interest II!payable, II!taxes II!payable, II!deferred II!revenues) II!- II! II!Correct II!Answers II! II! II! II!Current II!liabilities II!on II!a II!balance II!sheet II!include II!accretion II!- II! II!Correct II!Answers II! II! II! II!Asset II!growth II!through II!addition II!or II!expansion. II!Can II!occur II!through II!internal II!development II!or II!mergers II!and II!acquisitions II!amortization II!- II! II!Correct II!Answers II! II! II! II!Paying II!offII!a II!debt II!in II!regular II!installments II!over II!aII!period II!of II!time. II!Also, II!the II!deduction II!of II!capital II!expenses II!over II!aII!specific II!period II!of II!time. II!This II!method II!measures II!the II!consumption II!of II!the II!value II!of II!intangibleII!assets II!like II!patents II!and II!copyrights II!balance II!sheet II!components II!- II! II!Correct II!Answers II! II! II! II!Assets, II!liabilities, II!owners' II!equity II!current II!assets II!- II! II!Correct II!Answers II! II! II! II!Cash II!and II!cash II!equivalents, II!accounts II!receivable, II!prepaid II!expenses, II!inventory, II!marketable II!securities II!debits II!(left) II!- II! II!Correct II!Answers II! II! II! II!increase II!asset II!and II!expense II!accounts II!and II!decrease II!liability II!and II!revenue II!accounts II!credits II!(right) II!- II! II!Correct II!Answers II! II! II! II!increase II!liability II!and II!revenue II!accounts II!and II!decrease II!asset II!and II!expense II!accounts II!depreciation II!- II! II!Correct II!Answers II! II! II! II!Method II!of II!allocation II!the II!cost II!of II!a II!tangible II!asset II!over II!its II!useful II!life II!(for II!both II!tax II!& II!accounting II!purposes)II!or II!a II!decrease II!in II!an II!assets II!value II!caused II!by II!unfavorable II!market II!conditions II!financial II!statements II!- II! II!Correct II!Answers II! II! II! II!Records II!that II!outline II!the II!financial II!activity II!of II!a II!business, II!an II!individual, II!or II!any II!other II!entity
II!accounts II!receivable II!turnover II!(asset II!management) II!- II! II!Correct II!Answers II! II! II! II!How II!many II!times II!in II!the II!period II!the II!company II!collects II!it II!AR II!asset II!turnover II!(asset II!management) II!- II! II!Correct II!Answers II! II! II! II!HowII!efficiently II!the II!company II!isII!usingII!its II!assets II!to II!generate II!sales II!current II!ratio II!(liquidity) II!- II! II!Correct II!Answers II! II! II! II!Current II!Assets II!/ II!Current II!Liabilities Whether II!company II!is II!liquid II!enough II!to II!be II!able II!to II!pay II!its II!short-term II!debts II!days II!sales II!outstanding II!(asset II!management) II!- II! II!Correct II!Answers II! II! II! II!On II!average II!how II!long II!it II!takes II!the II!company II!to II!collect II!its II!AR II!from II!customers II!days II!sales II!of II!inventory II!( II!asset II!management) II!- II! II!Correct II!Answers II! II! II! II!Using II!an II!average II!rate II!of II!sales, II!how II!long II!the II!company II!will II!have II!inventory II!until II!it II!sells II!out, II!assuming II!no II!further II!additions II!to II!inventory II!debt II!ratio II!(leverage) II!- II! II!Correct II!Answers II! II! II! II!What II!% II!of II!theII!company's II!assets II!are II!financed II!by II!creditors II!debt II!to II!equity II!ratio II!(leverage) II!- II! II!Correct II!Answers II! II! II! II!HowII!heavily II!burdened II!with II!debt II!aII!company II!is II!dividend II!payout II!ratio II!(profitability) II!- II! II!Correct II!Answers II! II! II! II!How II!much II!of II!the II!company's II!earnings II!are II!distributed II!to II!the II!common II!stockholders II!earnings II!per II!share II!(profitability) II!- II! II!Correct II!Answers II! II! II! II!The II!earningsII!associated II!with II!one II!share II!of II!common II!stock; II!the II!only II!ratio II!required II!byII!GAAP II!to II!be II!presented II!with II!the II!financial II!statements II!gross II!margin II!ratio II!(profitability) II!- II! II!Correct II!Answers II! II! II! II!The II!excess II!of II!a II!product's II!selling II!price II!over II!cost, II!which II!is II!what II!the II!company II!has II!left II!to II!cover II!all II!remaining II!expenses II!and II!still II!make II!a II!profit II!inventory II!turnover II!(asset II!management) II!- II! II!Correct II!Answers II! II! II! II!On II!average II!how II!quickly II!inventory II!is II!sold
II!price/earnings II!ratio II!(profitability) II!- II! II!Correct II!Answers II! II! II! II!How II!much II!the II!earnings II!of II!the II!company II!cost II!an II!investor II!net II!profit II!margin II!(profitability) II!- II! II!Correct II!Answers II! II! II! II!TheII!% II!of II!net II!sales II!that II!represents II!profit II!quick II!ratio II!(liquidity) II!-II! II!Correct II!Answers II! II! II! II!(Cash II!+ II!Short II!Term II!investment II!+AR) II!/ II!Current II!Liabilities A II!more II!conservativeII!measure II!of II!liquidity II!return II!on II!assets II!(profitability) II!- II! II!Correct II!Answers II! II! II! II!The II!amount II!of II!income II!being II!generated II!by II!the II!company's II!assets II!return II!on II!equity II!(profitability) II!- II! II!Correct II!Answers II! II! II! II!Net II!Income II!/Avg II!Stockholders' II!Equity II!contra II!account II!- II! II!Correct II!Answers II! II! II! II!An II!account II!found II!in II!an II!account II!ledger II!that II!is II!used II!to II!reduce II!that II!value II!of II!a II!related II!account. II!Items II!recorded II!in II!the II!contra II!account II!are II!specifically II!designed II!to II!offset II!other II!transactions, II!and II!are II!recorded II!as II!the II!opposite II!type II!of II!entry. II!Contra II!accounts II!are II!used II!for II!several II!reasons. II!They II!can II!be II!used II!to II!correct II!previous II!accounting II!mistakes II!income II!statement II!accounts II!- II! II!Correct II!Answers II! II! II! II!revenues II!and II!expenses (Operating II!revenues, II!operating II!expenses, II!non-operating II!revenues II!and II!gains, II!non-operating II!expenses II!and II!losses) (also II!known II!as II!temporary II!accounts II!b/c II!the II!accounts II!will II!closeII!at II!the II!end II!of II!accounting II!year) II!accounts II!receivable II!- II! II!Correct II!Answers II! II! II! II!Money II!owed II!by II!customers II!(individuals II!or II!corp.) II!to II!another II!entity II!in II!exchange II!for II!goods II!or II!services II!that II!have II!been II!delivered II!or II!used, II!but II!not II!yet II!paid II!for II!accounts II!payable II!- II! II!Correct II!Answers II! II! II! II!Money II!owed II!by II!a II!business II!to II!its II!suppliers II!shown II!as II!a II!liability II!on II!a II!company's II!balance II!sheet II!liability II!- II! II!Correct II!Answers II! II! II! II!Something II!for II!which II!one II!isII!liable; II!an II!obligation, II!responsibility, II!or II!debt
II!capital II!budgetingII!- II! II!Correct II!Answers II! II! II! II!The II!process II!in II!which II!a II!business II!decides II!whether II!projects II!such II!as II!building II!a II!new II!plant II!or II!investing II!in II!a II!long-term II!ventureII!are II!worth II!pursuing. II!cash II!flow II!- II! II!Correct II!Answers II! II! II! II!is II!the II!movement II!of II!money II!into II!or II!out II!of II!a II!business.(how II!it's II!received II!& II!how II!it's II!spent) II!(operating II!activities) II!equal II!- II! II!Correct II!Answers II! II! II! II!debits II!and II!credits II!must II!balance II!______ II!capital II!- II! II!Correct II!Answers II! II! II! II!The II!account II!credited II!in II!the II!entry II!to II!record II!the II!investment II!of II!an II!asset II!by II!the II!owner II!net II!- II! II!Correct II!Answers II! II! II! II!remember II!____ II!isII!afterII!taxes II!certificate II!of II!deposit II!(CD) II!-II! II!Correct II!Answers II! II! II! II!A II!savings II!account II!which II!is II!paid II!interest II!and II!is II!penalized II!if II!withdrawn II!prior II!to II!an II!agreed II!upon II!maturity II!date II!checking II!account II!- II! II!Correct II!Answers II! II! II! II!A II!bank II!account II!that II!allows II!you II!to II!deposit II!and II!withdraw II!money, II!make II!point-of-sale II!purchases II!and II!write II!checks II!savings II!account II!- II! II!Correct II!Answers II! II! II! II!An II!FDIC-insured II!bank II!deposit II!account II!that II!earns II!interest. II!online II!banking II!- II! II!Correct II!Answers II! II! II! II!A II!service II!that II!allows II!you II!to II!handle II!most II!banking II!activities II!from II!your II!computer II!via II!the II!Internet. II!Banking II!activitiesII!such II!as II!opening II!accounts, II!monitoring II!account II!activity, II!transferring II!funds, II!paying II!bills, II!etc., II!can II!be II!done II!quickly, II!easily II!and II!safely II!traditional II!IRA II!-II! II!Correct II!Answers II! II! II! II!A II!retirement II!account II!that II!allows II!individuals II!to II!set II!aside II!money II!each II!year. II!Contributions II!may II!be II!tax II!deductibleII!and II!earnings II!grow II!tax-deferred. II!Deductible II!contributions II!and II!earnings II!are II!taxed II!when II!withdrawn, II!typicallyII!at II!retirement. II!other II!real II!estateII!owned II!(OREO) II!- II! II!Correct II!Answers II! II! II! II!this II!term II!refers II!to II!real II!property II!owned II!by II!a II!banking II!institution II!which II!is II!not II!directly II!related II!to II!its II!business. II!In II!balance II!sheet II!terms, II!(OREO) II!assets II!are II!considered II!non-earning II!assets II!for II!purposes II!of II!regulatory II!accounting. II!Result II!of II!foreclosure II!on II!real II!property
II!interest II!- II! II!Correct II!Answers II! II! II! II!AII!fixed II!amount II!paid II!on II!deposits II!or II!a II!fixed II!charge II!for II!borrowing II!money, II!usually II!a II!percentage II!of II!the II!amount II!deposited II!or II!borrowed II!collateral II!- II! II!Correct II!Answers II! II! II! II!a II!loan II!secured II!by II!some II!asset II!you II!own. II!You II!promise II!to II!hand II!the II!asset II!over II!to II!the II!lender II!if II!you II!cannot II!repay II!the II!loan II!as II!agreed. II!Ex. II!of II!assets II!you II!can II!use: II!vehicles, II!homes, II!insurance II!policy, II!cash II!accounts, II!valuablesII!and II!collectibles II!annuity II!- II! II!Correct II!Answers II! II! II! II!a II!contract II!between II!the II!buyer II!and II!an II!insurance II!company. II!In II!general, II!the II!insurance II!company II!promises II!to II!do II!something II!with II!the II!buyer's II!money II!-- II!like II!grow II!it II!or II!pay II!it II!out II!over II!a II!number II!of II!years II!unsecured II!loan II!- II! II!Correct II!Answers II! II! II! II!allow II!you II!to II!borrow II!money II!for II!almost II!any II!purpose. II!You II!can II!use II!the II!funds II!to II!start II!a II!business, II!or II!consolidate II!debt II!repayment II!capacity II!- II! II!Correct II!Answers II! II! II! II!________ II!________ II!measures II!provideII!insight II!into II!your II!ability II!to II!generate II!enough II!funds II!to II!make II!debt II!payments II!on II!intermediate II!and II!long-term II!loans II!real II!estate II!- II! II!Correct II!Answers II! II! II! II!Land II!plus II!anything II!permanently II!fixed II!to II!it, II!including II!buildings, II!sheds II!and II!other II!items II!attached II!to II!the II!structure, II!ex. II!houses, II!retail II!stores, II!office II!buildings, II!undeveloped II!land II!stock II!- II! II!Correct II!Answers II! II! II! II!is II!ownership II!in II!a II!company II!bond II!- II! II!Correct II!Answers II! II! II! II!is II!a II!printed II!promise II!to II!pay II!a II!definite II!amount II!of II!money, II!with II!interest, II!at II!a II!specific II!time. II!When II!you II!buy II!a II!_____, II!you II!lend II!moneyII!to II!either II!a II!corporation II!or II!the II!government. II!A II!_____ II!is II!a II!long-term II!loan II!dividend II!- II! II!Correct II!Answers II! II! II! II!an II!amount II!of II!a II!company's II!profits II!that II!the II!company II!pays II!to II!people II!who II!own II!stock II!in II!the II!company II!general II!ledger II!- II! II!Correct II!Answers II! II! II! II!A II!ledger II!that II!contains II!all II!accounts II!needed II!to II!prepare II!financial II!statements
II!Which II!one II!of II!the II!following II!isII!generally II!considered II!an II!intangible II!asset? a. II!Plant, II!property II!and II!equipment b. II!Purchased II!goodwill c. II!Petroleum II!deposits d. II!Mineral II!rights II!- II! II!Correct II!Answers II! II! II! II!B- II!Purchased II!goodwill II!Zeta II!Incorporated II!paid II!three II!months' II!rent II!inII!advance II!on II!its II!new II!store. II!At II!the II!beginning II!of II!the II!next II!month, II!one II!month's II!rent II!must II!be II!recorded II!as: II! a. II!A II!prepaid II!asset b. II!A II!liability c. II!An II!expense d. II!Revenue II!- II! II!Correct II!Answers II! II! II! II!C- II!An II!expense II!To II!a II!bank, II!the II!allowance II!for II!loan II!and II!leaseII!lossesII!account II!is II!similar II!to: II! a. II!Bad II!debt II!expense b. II!Bad II!debt II!accretion. II! c. II!Provision II!expense. II! d. II!Allowance II!for II!bad II!debts. II!- II! II!Correct II!Answers II! II! II! II!D- II!Allowance II!for II!bad II!debts II!Depreciation II!is II!an II!accounting II!procedure II!that: II! a. II!Allocates II!the II!cost II!of II!an II!asset II!over II!its II!useful II!life. b. II!Distributes II!the II!market II!value II!of II!an II!asset II!over II!its II!useful II!life. II! c. II!Records II!the II!increase II!in II!value II!of II!real II!estate II!holdings. II! d. II!Divides II!equipment II!cost II!over II!an II!accounting II!period. II!- II! II!Correct II!Answers II! II! II! II!A- II!Allocates II!the II!cost II!of II!an II!asset II!over II!its II!useful II!life II!General II!and II!administrative II!expensesII!on II!the II!incomeII!statement II!generally II!do II!NOT II!include II!which II!of II!the II!following? II! a. II!Store II!display II!costs
b. II!Telephone II!and II!communication II!costs. II! c. II!Heat, II!light II!and II!power II!costs. II! d. II!Postage II!and II!office II!supplies. II!- II! II!Correct II!Answers II! II! II! II!A- II!Store II!display II!costs II!Gross II!profit II!is II!calculated II!as: II! a. II!Revenues II!minus II!extraordinary II!items b. II!Gross II!profits II!divided II!by II!net II!sales II!X II!100. II! c. II!Revenues II!minus II!CGS. II! d. II!None II!of II!the II!above II!- II! II!Correct II!Answers II! II! II! II!C- II!Revenues II!minus II!CGS II!Which II!of II!the II!following II!pieces II!of II!information II!do II!you II!need II!to II!know II!to II!calculate II!the II!return II!on II!assets II!for II!the II!year? II! a. II!The II!total II!current II!assets II!and II!the II!net II!income II!at II!the II!end II!of II!the II!year. II! b. II!The II!total II!assets II!and II!the II!net II!income II!at II!the II!end II!of II!the II!year. c. II!The II!total II!assets II!and II!the II!net II!operating II!income II!at II!the II!end II!of II!the II!year. II! d. II!The II!current II!assets II!and II!the II!net II!income II!at II!the II!end II!of II!the II!year. II!- II! II!Correct II!Answers II! II! II! II!B- II!The II!total II!assets II!and II!the II!net II!income II!at II!the II!end II!of II!the II!year. II!Possible II!future II!claims II!against II!a II!business II!are: II! a. II!Contingent II!liabilities b. II!Loans c. II!Investments d. II!Interest II!income II!- II! II!Correct II!Answers II! II! II! II!A- II!Contingent II!liabilities II!A II!major II!reason II!for II!business II!borrowing II!is: II! a. II!Increase II!in II!accounts II!receivable II!caused II!by II!a II!decrease II!in II!inventory II!days II!on II!hand. II! b. II!Growth II!in II!inventory II!caused II!byII!a II!decrease II!in II!inventory II!days II!on II!hand c. II!Decreases II!in II!accounts II!receivableII!caused II!byII!an II!increase II!in II!inventory II!days II!on II!hand. II! d. II!Growth II!in II!inventory II!caused II!byII!an II!increase II!in II!inventory II!days II!on II!hand II!- II! II!Correct II!Answers II! II! II! II!D- II!Growth II!in II!inventory II!caused II!by II!an II!increase II!in II!inventory II!days II!on II!hand.