Question 1

Which of the following is correct?

Accepted Answer

A)  Management is under constant pressure from directors to produce pleasing financial results,whatever it takes.
B)  Directors oversee the managers of the company and have the primary goal of ensuring that financial decisions benefit management.
C)  Managers oversee the members of the Board of Directors.
D)  The stockholders elect the board of directors.E) A) and D)
F) None of the above

Question 2

Accounting information serves a valuation function when it is used by:

Accepted Answer

A)  managers to run the business.
B)  directors to protect stockholders' interests.
C)  government officials to protect the public's interests.
D)  investors to estimate how much the business is worth.E) None of the above
F) A) and B)

Question 3

Under IFRS,the balance sheet is called the statement of financial position and the income statement is called the statement of comprehensive income.

Accepted Answer

A) True 
 B)False

Question 4

The incentive element of the fraud triangle includes reasons why top management may commit fraud such as enhancing job security and obtaining bigger paychecks.

Accepted Answer

A) True 
 B)False

Question 5

The Sarbanes-Oxley Act (SOX)grants legal protection to 'whistle-blowers.'

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements about a multiple-step income statement is not true?

Accepted Answer

A)  Net income plus income tax expense is equal to income before income taxes.
B)  Depreciation would be considered an operating expense.
C)  Income before income taxes less non-operating expenses,plus non-operating revenues is equal to income from operations.
D)  Net income plus income tax expense plus non-operating expenses less non-operating revenues equals income from operations.E) C) and D)
F) A) and B)

Question 7

What is the debt-to-assets ratio at the end of 2015?

Accepted Answer

A)  2.5
B)  0.34
C)  0.40
D)  0.35E) A) and B)
F) A) and C)

Question 8

External audits are conducted by Certified Public Accountants (CPAs)who are not independent of the company.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements regarding the asset turnover ratio is true?

Accepted Answer

A)  The asset turnover ratio compares the amount of sales revenue for the period to the book value of assets at the end of the period.
B)  An asset turnover ratio must be less than 1.
C)  The higher the ratio,the less efficiently the company is using its assets.
D)  This ratio is not expressed as a percentage.E) B) and C)
F) B) and D)

Question 10

The company's asset turnover ratio for 2014 is:

Accepted Answer

A)  2.5
B)  0.5
C)  0.45
D)  0.1E) None of the above
F) A) and B)

Question 11

The company's debt-to-assets ratio on January 1,2015 is:

Accepted Answer

A)  0.55
B)  0.45
C)  0.035
D)  0.01E) A) and B)
F) All of the above

Question 12

Which of the following is not an example of a benchmark?

Accepted Answer

A)  SEC filings.
B)  Time Series Analyses.
C)  Cross Sectional Analysis.
D)  Comparative Financial Statements.E) A) and C)
F) B) and C)

Question 13

Accounting information serves a management function when it is used by:

Accepted Answer

A)  executives to make a business decision.
B)  government officials to regulate the business and its financial records.
C)  labor unions to negotiate contracts with the business.
D)  investors to vote on company policies.E) C) and D)
F) B) and C)

Question 14

According to the Sarbanes-Oxley Act (SOX) ,who are possible members of the Audit Committee?

Accepted Answer

A)  The president of the company.
B)  Chief financial officer of the company.
C)  Independent directors.
D)  External auditors.E) A) and B)
F) A) and C)

Question 15

Under IFRS,which of the following is not true?

Accepted Answer

A)  The income statement is called the earnings statement.
B)  The balance sheet is called the statement of financial position.
C)  The statement of stockholders' equity is called the statement of shareholders' equity.
D)  The cash flow statement is called the cash flow statement.E) A) and B)
F) B) and C)

Question 16

A company increases sales revenue.Total assets and net income are unchanged.The company's

Accepted Answer

A)  net profit margin and asset turnover both rise.
B)  net profit margin rises and its asset turnover falls.
C)  net profit margin and asset turnover ratio both fall.
D)  net profit margin falls and its asset turnover ratio rises.E) A) and D)
F) B) and C)

Question 17

What effect will transaction (a) have on the net profit margin and debt-to-assets ratios?

Accepted Answer

A)  Net profit margin will increase and debt-to-assets will decrease.
B)  Net profit margin will decrease and debt-to-assets will increase.
C)  Both ratios will decrease.
D)  Both ratios will increase.E) B) and C)
F) None of the above

Question 18

If the company doesn't have other sources of revenue,its net profit margin during 2014 is closest to:

Accepted Answer

A)  0.01
B)  0.013
C)  0.22
D)  0.022E) A) and C)
F) C) and D)

Question 19

A purpose of comparative income statements is to

Accepted Answer

A)  reveal trends in sales.
B)  see how the company compares to its competitors.
C)  show whether retained earnings has increased or decreased over the years.
D)  help prevent fraud.E) C) and D)
F) A) and B)

Question 20

Which of the following statements is not true concerning the independent external audit?

Accepted Answer

A)  The SEC requires all publicly traded companies to have their internal controls audited by external auditors.
B)  Many privately owned companies have their financial statements audited at the request of lenders.
C)  The goal of the external audit is to detect material misstatements.
D)  The auditors are required to check every transaction in order to provide assurance to financial statement users.E) B) and D)
F) A) and B)

Exam 5: Financial Reporting and Analysis

Which of the following statements regarding the asset turnover ratio is true?

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Which of the following statements is not true concerning the independent external audit?

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Accounting information serves a management function when it is used by:

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Which of the following is correct?

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A purpose of comparative income statements is to

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What effect will transaction (a) have on the net profit margin and debt-to-assets ratios?

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The company's debt-to-assets ratio on January 1,2015 is:

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According to the Sarbanes-Oxley Act (SOX) ,who are possible members of the Audit Committee?

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Under IFRS,the balance sheet is called the statement of financial position and the income statement is called the statement of comprehensive income.

Correct AnswerverifiedShow Answer

Under IFRS,which of the following is not true?

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The company's asset turnover ratio for 2014 is:

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External audits are conducted by Certified Public Accountants (CPAs)who are not independent of the company.

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The Sarbanes-Oxley Act (SOX)grants legal protection to 'whistle-blowers.'

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A company increases sales revenue.Total assets and net income are unchanged.The company's

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What is the debt-to-assets ratio at the end of 2015?

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If the company doesn't have other sources of revenue,its net profit margin during 2014 is closest to:

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Which of the following is not an example of a benchmark?

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Which of the following statements about a multiple-step income statement is not true?

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The incentive element of the fraud triangle includes reasons why top management may commit fraud such as enhancing job security and obtaining bigger paychecks.

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Accounting information serves a valuation function when it is used by:

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