C213 Accounting for Decision Makers (VAC2) Latest version

1. Which events represent financial information recorded in the accounting system of a business?

A.  Personal events of each business owner during a year

B.  Business events that have already occurred  ✓

C.  Personal events of each business owner that are likely to occur in the future

D.  Business events that are likely to occur in the future

2. Which information does a balance sheet provide about a company?

A.  Revenues and expenses for a period of time

B.  Cash collections and cash expenditures at a specific point in time

C.  Cash collections and cash expenditures for a period of time

D.  Assets and liabilities for a specific point in time  ✓

3. Which user group of financial statements evaluates the ability to repay loans?

A.  Suppliers

B.  Lenders  ✓

C.  Management

D.  Investors

4. Which organization establishes rules U.S. companies use to record and report accounting transactions?

A.  Financial Accounting Standards Board  ✓

B.  Internal Revenue Service

C.  Accounting Principles Board

D.  Securities and Exchange Commission

5. Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large, publicly traded company?

A.  The Financial Accounting Standards Advisory Council (FASAC)

B.  The Financial Accounting Standards Board (FASB)

C.  The Internal Revenue Service (IRS)

D.  The Public Company Accounting Oversight Board (PCAOB)  ✓

6. What is true regarding the use of International Financial Reporting Standards (IFRS)?

A.  IFRS are seldom used by non-U.S. companies.

B.  IFRS may be used instead of generally accepted accounting principles (GAAP) by any U.S.-based corporation.

C.  IFRS are commonly required to be used in Asia.  ✓

D.  IFRS are required to be used by the Securities and Exchange Commission (SEC).

7. Which act was implemented as a result of the corporate scandals at companies such as Enron and WorldCom?

A.  Auditing Accountability Act

B.  Corporate Accountability Act

C.  Sarbanes-Oxley Act  ✓

D.  Securities Exchange Act

8. Which balance sheet category reflects what a company owns that can be turned into cash or used to generate cash?

A.  Assets  ✓

B.  Owners’ equity

C.  Liabilities

D.  Revenues

9. A corporation has liabilities and owners’ equity of $100 million and $40 million, respectively. What is the amount of the asset balance in this case?

A.  $140 million  ✓

B.  $80 million

C.  $60 million

D.  $2.5 million

10. Which two items on an income statement result in decreased net income if they are increased? (Choose 2 answers.)

A.  Revenues

B.  Interest expense  ✓

C.  Gains

D.  Cost of goods sold  ✓

11. Where should a company report cash payments to acquire or construct long-term fixed assets on a statement of cash flows?

A.  Cash flows from business activities

B.  Cash flows from financing activities

C.  Cash flows from operating activities

D.  Cash flows from investing activities  ✓

12. What purpose do the notes within financial statements serve to the Financial Accounting Standards Board?

A.  Summarizing totals of financial statements

B.  Disclosing financial statistics

C.  Providing supplementary information as needed  ✓

D.  Providing a summary of accounting policies

13. What can be determined when a firm performs an external audit of a company’s financial statements?

A.  Whether a company’s financial statements fairly reflect its financial position  ✓

B.  Whether a company’s financial statements indicate that the company has to pay income taxes

C.  Whether a company’s financial statements indicate it made a profit

D.  Whether a company’s financial statements were prepared by a trained bookkeeper

14. Match each accounting term with its definition. (Answer options may be used more than once or not at all.)

Term	Definition
Conservatism	Information related to recognizing losses as they occur
Material	Information that is important enough to make a difference
Relevant	Information/having to do with the matter at hand
Reliable	Information that can be verified

Correct matches are shown in the table above (each term paired with its correct definition).

15. Which ratio provides a measure of how well a company turns sales into profits?

A.  Return on sales  ✓

B.  Return on costs

C.  Return on expenses

D.  Return on profit

16. Using the partial financial information below, what is the current ratio for this company?

Current assets	$36,543
Total assets	$58,719
Current liabilities	$24,824
Total liabilities	$48,561
Stockholders’ equity	$10,158
Sales	$46,997
Net income	$3,761
Market value of equity	$41,316

Note: the answer choices were not visible in your screenshot; only the correct answer is shown.

A.  1.47  ✓

17. What does it mean if a company has a debt ratio of 101.5%?

A.  The company has 1.5% more total liabilities than total assets.  ✓

B.  The company has 1.5% more total liabilities than net income.

C.  The company has 1.5% more current liabilities than current assets.

D.  The company has 1.5% more total liabilities than gross sales.

18. What can be deduced when a company has an asset turnover of 0.95?

A.  The company was able to generate $0.95 in liabilities for each dollar in assets.

B.  The company was able to generate $0.95 in equity for each dollar in assets.

C.  The company was able to generate $0.95 in sales for each dollar in assets.  ✓

D.  The company was able to generate $0.95 in profit for each dollar in assets.

19. Which change occurred if the cost of goods sold moved from 76.8% to 72.6%?

A.  Gross profit percentage decreased by 4.2%.

B.  Gross profit percentage increased by 4.2%.  ✓

C.  Net profit percentage decreased by 4.2%.

D.  Net profit percentage increased by 4.2%.

20. Which formula yields a cash times interest earned ratio of 11?

A.  Cash before interest and taxes of $11,000 / cash paid for interest of $1,000  ✓

B.  Cash before interest and taxes of $11,000 / cash paid for acquisitions of $1,000

C.  Cash before interest and taxes of $11,000 / cash paid for income taxes of $1,000

D.  Cash before interest and taxes of $11,000 / cash from operations of $1,000

21. Using the partial financial information below, what is the cash flow to net income ratio for this company in 20X2?

Financial Category	20X3	20X2
Net income	$3,540	$4,417
Cash from operations	$5,613	$5,964
Cash paid for capital expenditures	$2,782	$2,860
Cash paid for acquisitions	$26	$2,652
Cash paid for interest	$630	$709
Cash paid for income taxes	$1,134	$812

A.  2.45

B.  1.35  ✓

C.  1.80

D.  2.01

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