Finance > QUESTIONS & ANSWERS > ACG 2021 ch 1-4 exam Questions and answers, 100% accurate, rated A (All)

ACG 2021 ch 1-4 exam Questions and answers, 100% accurate, rated A

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ACG 2021 ch 1-4 exam Questions and answers, 100% accurate, rated A Sole proprietorship - ✔✔--simple to establish -owner controlled -tax advantages Partnership - ✔✔--simple to establish ... -shared control -broader skills -tax advantages Corporation - ✔✔--easier to transfer ownership -easier to raise funds -no personal liability Internal users - ✔✔-marketing, management, finance, HR External users - ✔✔-creditors and investors Sarbanes oxley act - ✔✔-law passed to keep financial information ethical so that investors wouldn't lose faith in corporate accounting 3 types of business activities - ✔✔-Financing, investing, operating Financing activities - ✔✔-borrowing money and issuing stock for cash Investing activities - ✔✔-purchasing resources a company needs to operate (usually PP&E) and investments Accounting information system - ✔✔-keeps track of business activities Operating activities - ✔✔-marketing, distributing, manufacturing, selling.... affects revenue, inventory, receivables, expenses, liabilities, net income/loss Four financial statements (ch 1) - ✔✔-income statement, retained earnings statement, balance sheet, statement of cash flows Income statement - ✔✔-rev -exp =net inc Retained earnings statement (Statement of stockholders equity) - ✔✔-Beg retained earnings +owner contributions + net income (from inc statement) -dividends =end retained earnings Balance sheet - ✔✔-Assets= Liabilities + equity Financial statement title format - ✔✔-Company name Type of statement Date Statement of cash flows (example) - ✔✔-Cash flows from operating activities Cash receipts (+) Cash payments (-) =net cash from op act Cash flows from investing activities Purchased equipment (-) =net cash from inv act Cash flows from financing activities Issuance of common stock (+) Issuance of note payable (+) Payment of dividend (-) =net cash from fin act =Net increase in cash +cash at beg of period =Cash at end of period Which financial statement is for a specific date rather than a period of time? - ✔✔-Balance Sheet Annual reports include - ✔✔-financial statements, management discussion and analysis, notes to the financial statements, auditor's report Management discussion and analysis - ✔✔-company's ability to pay near term obligations, to fund operation and expansion, and the results of operation Notes to the financial statements - ✔✔-clarify financial statements, provide additional qualitative or quantitative data, explain contingencies Auditor's opinions - ✔✔-unqualified, qualified, disclaimer, adverse Unqualified opinion - ✔✔-no significant errors in financial statement Qualified opinion - ✔✔-limitation of scope within audit or violation of GAAP Disclaimer - ✔✔-auditor can't satisfy themselves w/ fairness of financial statement Adverse opinion - ✔✔-very misstated financial statement that doesn't comply w/ GAAP Types of assets - ✔✔-current assets, long term assets, PP&E, intangible assets Current assets - ✔✔-assets the company expects to use within one year or one operating cycle Companies put current assets in order of ____ - ✔✔-most to least liquid Long term investments (examples) - ✔✔--investments in stocks or bonds that are held for more than a year -land or buildings that the company is not currently using -long term notes receivable Property, plant, and equipment - ✔✔--long, useful lives -currently used in operations Intangible assets - ✔✔-assets that do not have a physical substance ex: goodwill, patents, copyrights, etc Earnings per share (EPS) - ✔✔-(net income-preferred dividends)/avg common shares outstanding Liquidity - ✔✔-ability to pay obligations expected to become due within the next year or operating cycle Working Capital - ✔✔-Current assets-current liabilities Current Ratio (liquidity ratio) - ✔✔-Current assets/current liabilities Higher current ratio, _____ liquidity - ✔✔-more Solvency - ✔✔-the ability to pay interest as it comes due and repay the balance of a debt due at its maturity Solvency ratios measure - ✔✔-the ability of a company to survive over a long period of time Debt to assets ratio measures - ✔✔-the percentage of total financing provided by creditors rather than stockholders Debt to assets ratio formula - ✔✔-Total liabilities/total assets Higher debt to asset ratio, _____ solvency - ✔✔-lower Free cash flow is a measurement - ✔✔-to provide addl insight regarding a company's cash generating ability Free cash flow formula - ✔✔-cash provided by operations-capital expenditures-cash dividends GAAP - ✔✔-a set of rules for general financial reporting purposes Groups that determine GAAP guidelines - ✔✔-SEC, FASB, IASB, PCAOB 2 fundamental qualities of useful information - ✔✔-relevance and faithful representation Other qualities of useful information - ✔✔-comparable, verifiable, understandable, consistent, timely Monetary unit - ✔✔-requires only things that can be expressed in money are included on accounting records Economic entity - ✔✔-states that every economic entity can be separately identified and accounted for Periodicy - ✔✔-states that the life of a business can be divided into artificial time periods Going concern - ✔✔-the business will remain in operation for the foreseeable future Historical cost - ✔✔-also called cost principle, dictates that companies record assets at their cost Fair value - ✔✔-indicates that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability) Full disclosure - ✔✔-requires that companies disclose all circumstances and events that would make a difference to financial statement users Cost constraint - ✔✔-accounting standard setters weigh the costs that companies will incur to provide info against the benefit that financial statement users will gain from having the information available Materiality - ✔✔-the judgment concerning whether an item is large enough to matter to decision makers Consistency - ✔✔-the use of the same accounting principles year to year Relevance - ✔✔-the quality of information that indicates the info makes a difference in a decision Why might a company use free cash flow? - ✔✔--to pay off debts -to pay addl dividends -to acquire PP&E A company purchased a tract of land on which it expects to build a production plant in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported? - ✔✔-long term asset Issuing new shares of common stock will _____ common stock - ✔✔-increase What indicates that personal and business record-keeping should be separately maintained? - ✔✔- economic entity assumption Bonds payable is a ______ liability - ✔✔-long ter [Show More]

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