1) Operating assets exclude investments, land, and intangibles from the asset base.
2) The Governmental Accounting Standards Board is a branch of the Financial
Accounting Foundation.
3) The accrual basis of accounting recognizes revenue when realized (realization
concept) and expenses when incurred (matching concept).
4) For public companies reporting under Sarbanes-Oxley, the auditor reports on the
firm’s internal controls in addition to the audit report.
5) The retained earnings account is the link between the balance sheet and the statement
of cash flows.
6) Decision usefulness is a pervasive constraint imposed upon financial accounting
information.
7) When a firm repurchases its own stock and retires it, the stock is called treasury
stock.
8) Retained earnings, an account on the balance sheet, represents the undistributed
earnings of the corporation.
9) Deferred taxes are caused by using different accounting methods for tax and
financial reporting purposes.
10) Equity earnings can distort the reported results of a business’s operations.
11) The operating cycle is the time between the acquisition of inventory and the
realization of cash from selling the inventory.
12) Most of the ratios given a high significance rating by chartered financial analysts
have a primary measure of profitability.