Elance Financial Statement Test Questions

Question: 01
The phenomenon of common shareholders trading at extra risk for a potentially higher return is called ____?


    a.     financial leverage
    b.     operating leverage
    c.     liquidity
    d.     interest coverage ratio


Question: 02
When an auditor feels that an opinion cannot be expressed as to the fairness of a company's financial statements as a whole, he issues a/an _____ ?


    a.     qualified opinion
    b.     agreed opinion
    c.     unqualified opinion
    d.     adverse opinion


Question: 03
Which of the following financial statements provides information about economic resources and claims on those resources?


    a.     Income Statement
    b.     Balance Sheet
    c.     Statement of Cash Flows
    d.     All of the above


Question: 04
The ________________ indicates the number of times that the average inventory has been sold during a particular period.


    a.     Asset Utilization Ratio
    b.     Debt Equity Ratio
    c.     Inventory Turnover Ratio
    d.     Accounts Receivable Turnover


Question: 05
Which of the following ratios would NOT be used to assess a firm's long-term liquidity risk?


    a.     Debt-Equity ratio
    b.     Long-Term Debt ratio
    c.     Interest Coverage ratio
    d.     Current Ratio


Question: 06
Which of the following does NOT describe an expense?


    a.     Dividends paid to shareholders
    b.     Cost of merchandise sold
    c.     Salaries earned by employees but not yet paid
    d.     Depreciation of the firm's building for the particular period


Question: 07
The _______________ is used to indicate the relative protection of bondholders and to assess the probability of a firm's failing to meet required interest payments.


    a.     Interest Coverage Ratio
    b.     Gross Margin
    c.     Net Income
    d.     Asset Turnover


Question: 08
In computing the rate of return on common shareholders' equity, do dividends on preferred stock have to be added to net income?


    a.     Yes
    b.     No
    c.     Depends on whether the company is public or private
    d.     More information is needed


Question: 09
The _______________ is a measure of a firm's ability to control the level of costs, or expenses, relative to sales.


    a.     Asset Turnover
    b.     Profit Margin Ratio
    c.     Times Interest Earned
    d.     Inventory Turnover


Question: 10
Revenues are a measure of the inflows of assets (or reductions in liabilities) from selling goods and providing services to customers. Which of the following is NOT a revenue transaction?


    a.     Sale of merchandise for cash to a customer
    b.     Sale of merchandise on account to a customer
    c.     Delivery of weekly magazines to a subscriber who previously paid for a one-year subscription
    d.     Borrowing money from a local bank to be used in the business


Question: 11
Which of the following ratios indicates the proportion of a firm's long-term capital that is provided by creditors?


    a.     Return on Equity
    b.     Long-Term Debt Ratio
    c.     Return on Assets
    d.     Quick Ratio


Question: 12
The ____________ is an agency of the federal government and has the legal authority to set acceptable accounting standards in the United States.


    a.     IASC
    b.     SEC
    c.     GAAP
    d.     FASB


Question: 13
Which of the following organizations, despite the fact that it has no legal authority, has played a role in developing acceptable accounting principles worldwide?


    a.     IASC
    b.     SEC
    c.     GAAP
    d.     FASB


Question: 14
During the year, XYZ Company issued additional common stock. This transaction is an example of which of the following?


    a.     An investing activity
    b.     A financing activity
    c.     An operating activity
    d.     None of the above


Question: 15
Which of the following financial statements provides information about inflows and outflows of cash?


    a.     Income Statement
    b.     Balance Sheet
    c.     Statement of Cash Flows
    d.     All of the above


Question: 16
Which of the following is NOT a current asset?


    a.     Cash
    b.     Land
    c.     Merchandise Inventory
    d.     Accounts Receivable


Question: 17
The _______________ is the financial statement that presents the results of earnings activity over time.


    a.     Balance Sheet
    b.     Income Statement
    c.     Cash Flow Statement
    d.     Retained Earnings Statement


Question: 18
XYZ Company reports total assets and total liabilities of $425,000 and $200,000, respectively, at the conclusion of its first year of business. The company earned $95,000 during the first year and distributed $50,000 in dividends. What was the firm's contributed capital?


    a.     $225,000
    b.     $180,000
    c.     $130,000
    d.     $65,000


Question: 19
The primary source of cash for most firms should be _______________?


    a.     operating activities
    b.     contributed capital
    c.     assets
    d.     financing activities


Question: 20
Which of the following ratios provides a measure of the sales generated for each dollar invested in assets?


    a.     Total Assets Turnover Ratio
    b.     Inventory Turnover Ratio
    c.     Return on Equity
    d.     Debt to Equity Ratio


Question: 21
Which of the following ratios measures the firm's performance in generating earnings that are assignable to the common shareholders' equity?


    a.     Rate of Return on Common Shareholders' Equity
    b.     Debt Equity
    c.     Return on Assets
    d.     Accounts Payable Turnover


Question: 22
Financial statements that are prepared using a particular set of assumptions are called ___________________?


    a.     Income Statements
    b.     Tax Liability Statements
    c.     Pro-Forma Financial Statements
    d.     Retained Earnings


Question: 23
A company wants to increase its rate of return on assets from 8 percent to 14 percent. It is believed that the firm's total assets turnover of .667 cannot be easily increased at the present time. What must the profit margin percentage be to achieve the desired 14 percent rate of return on assets?


    a.     7 percent
    b.     14 percent
    c.     21 percent
    d.     28 percent


Question: 24
Which of the following is NOT a measure of profitability?


    a.     Rate of Return on Assets
    b.     Accounts Payable Turnover Ratio
    c.     Rate of Return on Common Shareholders' Equity
    d.     Earnings Per Common Share


Question: 25
The ____________ is the excess of revenues over expenses for a particular period.


    a.     Net Income
    b.     Net Loss
    c.     Cash Inflow
    d.     Change in Assets


Question: 26
The ____________ is the financial statement that presents an overall view of a company's financial position as of a given date.

    a.     Balance Sheet
    b.     Income Statement
    c.     Cash Flow Statement
    d.     Retained Earnings Statement


Question: 27
A creditor's claim on the resources of the company is called ___________?


    a.     an asset
    b.     cash
    c.     equity
    d.     a liability


Question: 28
Which of the following ratios would probably NOT be used to analyze the Total Assets Turnover Ratio?


    a.     Fixed Asset Turnover
    b.     Accounts Receivable Turnover
    c.     Inventory Turnover
    d.     Long-Term Debt Ratio


Question: 29
Which of the following would NOT be used to evaluate a firm's operating cycle?


    a.     Accounts Payable Turnover Ratio
    b.     Inventory Turnover Ratio
    c.     Current Ratio
    d.     Accounts Receivable Turnover Ratio


Question: 30
Which of the following terms refers to the practice of using debt and preferred stock for financing in order to increase the return to the common shareholders' equity?


    a.     Equity
    b.     Asset Turnover
    c.     Liabilities
    d.     Financial Leverage


Question: 31
Which of the following is NOT used to assess short-term liquidity risk?


    a.     Accounts Receivable Turnover
    b.     Operating Cash Flow to Current Liabilities Ratio
    c.     Current Ratio
    d.     Quick Ratio


Question: 32
The ______________ is the sequence of activities in which inventory is purchased on account from suppliers, inventory is sold on account to customers, customers pay the amounts due, and suppliers are paid the amounts due to them.

    a.     Operating Cycle
    b.     Cash Inflow
    c.     Accounts Receivable Cycle
    d.     Accounts Payable Cycle


Question: 33
Which of the following ratios uses sales in its numerator?


    a.     Total Assets Turnover Ratio
    b.     Profit Margin Ratio
    c.     Fixed Asset Turnover Ratio
    d.     Both a & c


Question: 34
Which of the following can be described as "claims on resources that result from benefits previously received by the company, and which require that a specified amount be paid on a specified date"?


    a.     Shareholders' Equity
    b.     Contributed Capital
    c.     Liabilities
    d.     Retained Earnings


Question: 35
XYZ Company's retained earnings increased by $100,000 during the year. Also during the year, dividends totaling $22,500 were declared and paid to shareholders. What was XYZ Company's net income for the year?

    a.     $22,500
    b.     $77,500
    c.     $100,000
    d.     $122,500


Question: 36
The Rate of Return on Assets can be disaggregated into two other ratios. Which of the following is one of the two ratios?


    a.     Fixed Asset Turnover Ratio
    b.     Debt-Equity Ratio
    c.     Profit Margin Ratio
    d.     Inventory Turnover Ratio


Question: 37
The _______________ reports the net cash flows relating to operating, investing, and financing activities for a particular period of time.


    a.     Retained Earnings Statement
    b.     Balance Sheet
    c.     Income Statement
    d.     Cash Flow Statement


Question: 38
The ________________ generally includes cash, marketable securities, and accounts receivable in its numerator.


    a.     Quick Ratio
    b.     Debt Equity
    c.     Asset Turnover
    d.     Accounts Receivable Turnover


Question: 39
In the _____________, earnings per share amount are compared with the market price of the stock.


    a.     Quick Ratio
    b.     Pricing Earnings Ratio
    c.     Current Ratio
    d.     Accounts Payable Turnover Ratio


Question: 40
During the year, XYZ Company sold one of its warehouses for $250,000 cash. This transaction is an example of which of the following?


    a.     An investing activity
    b.     A financing activity
    c.     An operating activity
    d.     None of the above

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