What is an unqualified audit report?
a. A report stating that the auditors are not qualified to report on a firm.
b. A report that states the financial statements are in violation of GAAP.
c. A report that states that departures from GAAP exist in the firm’s financial
statements.
d. A report that states the financial statements are presented fairly, in all material
respects, and are in conformity with GAAP.
Wilcox’s cash flow adequacy ratio is:
a. 1.43
b. 2.15
c. 1.90
d. 0.54
What is cash from investing activities for Armstrong Company?
a. ($160)
b. $160
c. $170
d. ($170)
Which group of people would be the most concerned about the operating areas that
have contributed to the success of the firm and which have not?
a. Customers.
b. Management.
c. Auditors.
d. Creditors.
In what industry would it be expected that companies would spend a significant amount
on research and development activities?
a. Pharmaceutical.
b. Clothes retailer.
c. Groceries.
d. Wholesale distributor of computer parts.
Which of the following statements is false?
a. Companies are allowed to use more than one inventory valuation method.
b. LIFO is an income tax concept.
c. Using FIFO for high-technology products makes sense if the firm is trying to reduce
taxes because the technology industry is generally deflationary.
d. Companies using IFRS may not reverse entries for inventory write-downs if the
market recovers.
Which ratios help assess the firm’s ability to meet cash needs as they arise?
a. Current ratio and cash flow liquidity ratio.
b. Average collection period and net profit margin.
c. Debt ratio and dividend payout.
d. Operating profit margin and return on equity.
Using the statements of cash flows for JAJ Enterprises:
a. prepare a summary analysis of the statement of cash flows,
b. analyze cash flow from operating activities, and
c. analyze the cash inflows and cash outflows.
JAJ Enterprises
Statement of Cash Flows
For the Years Ended December 31, 2015 and 2014
Indicate which of the following current asset and current liability accounts are operating
(O), investing (I), or financing (F) accounts.
a. Current portion of long-term debt
b. Accounts receivable
c. Prepaid expenses
d. Marketable securities
e. Accrued expenses
f. Notes payable to bank
The following item would be classified as an operating activity on the statement of cash
flows:
a. Payments for inventory.
b. Acquisitions of equipment.
c. Proceeds from borrowing.
d. Payments on loans.
Which of the items below would be included under ‘Other income and expense’?
a. Salaries, interest expense, equity losses.
b. Equity earnings, gains from sale of assets, interest income.
c. Research and development, dividend income, interest expense.
d. Advertising, cost of goods sold, selling and administrative expenses.
How are sales reported on the income statement?
a. Sales are shown for three years net of returns and allowances.
b. Sales amounts are inflation-adjusted.
c. Sales are shown for two years and are reported in nominal terms.
d. Sales are shown at gross amounts, adjusted for inflation.
Wilcox’s total asset turnover ratio is:
a. 3.98
b. 4.22
c. 5.91
d. 3.34
Which financial statement provides information about operating, financing and
investing activities?
a. Statement of financial position.
b. Statement of cash flows.
c. Statement of stockholders’ equity.
d. Income statement.
What organization has the authority to register, inspect, and discipline auditors of all
publicly owned companies?
a. Public Company Accounting Oversight Board.
b. SOX.
c. Congress.
d. FASB.
What does a low asset turnover compared to the industry imply?
a. The investment in assets may be too high.
b. Sales are higher than average.
c. The investment in assets is too low.
d. Net income is low relative to the investment in assets.
Which financial statement shows the assets, liabilities and stockholders’ equity of the
firm on a particular date?
a. Statement of stockholders’ equity.
b. Statement of cash flows.
c. Earnings statement.
d. Balance sheet.
Form 10-Ks and Form 10-Qs can be located through the Dun & Bradstreet Information
services.
A corporate annual report contains financial statements.
The method of inventory generally results in the matching of current costs with current
revenues and therefore produces higher-quality earnings.
The cycle or cycle is the normal operating cycle of a firm that consists of buying or
manufacturing inventory, selling inventory and paying accounts payable and collecting
accounts receivable.
ratios measure a firm’s ability to meet cash needs as they arise.