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QUESTION 1

1.

Choose the best statement regarding the purpose of financial statements:


Financial statements allow businesses to give accountants something to do;
Financial statements allow businesses to properly account for the transactions they
undertake and to provide clear information to stakeholders;
Financial statements allow businesses to properly account for the transactions they
undertake and to provide bankers with the right information to foreclose on business
loans; or
Financial statements and the information contained in them is entirely sufficient for a
manager to do their job.

1 points

QUESTION 2
1.

Choose the best statement regarding balance sheets:


The balance sheet can be referred to as the statement of financial position and is based
on the accounting equation, assets = liabilities + equity;
The balance sheet can be referred to as the statement of financial performance and is
based on the accounting equation, assets = liabilities + equity;
The balance sheet can be referred to as the statement of financial performance and is
based on the profit equation, profit = revenue expenses; or
The balance sheet can be referred to as the statement of financial position and is based
on the profit equation, profit = revenue expenses.

1 points

QUESTION 3
1.

Choose the best statement regarding the income statement:


The income statement can be referred to as the statement of financial position and is

based on the accounting equation, assets = liabilities + equity;


The income statement can be referred to as the statement of financial position and is
based on the profit equation, profit = revenue expenses;
The income statement can be referred to as the statement of financial performance and
is based on the profit equation, profit = revenue expenses; or
The income statement can be referred to as the statement of financial performance and
is based on the accounting equation, assets = liabilities + equity.

1 points

QUESTION 4
1.

Choose the best statement regarding the cash flow statement:


The intention of the cash flow statement is to ensure accountants have enough work to
do, by supplementing the balance sheet and income statement with a statement about
cash;
The cash flow statement shows the firms cash in-flows and out-flows and is required by
stakeholders since profit and cash are not the same thing;
The cash flow statement is a redundant statement because profit and cash are the
same thing; or
The cash flow statement shows where some firms have too much cash and really
should give it to less fortunate causes.

1 points

QUESTION 5
1.

Choose the best statement regarding corporate requirements:


Companies are required to pay tax on their assets;
All companies must report to shareholders on an annual basis;

Franked dividends allow the company to reduce some of their taxation liability; or
Companies must report on business segments including geographical regions.

1 points

QUESTION 6
1.

Choose the best statement regarding consolidated accounts:


A parent-subsidiary relationship exists where one entity has control over another;
Where many parent-subsidiary relationships exist, in which one entity has control over
many entities, the parent entity may elect to produce one set of financial statements;
Where many parent-subsidiary relationships exist, inter-subsidiary exchanges are
forbidden; or
A parent-subsidiary relationship exists where many small companies get together to
form a network of cooperating business entities.

1 points

QUESTION 7
1.

Choose the best statement regarding financial statement analysis:


The present and ultra fast ratios are examples of liquidity ratios;
The earnings yield is calculated by dividing profit by the number of shares;
The dividend yield is calculated by dividing dividend per share by the share price; or
The stock movement index is calculated by dividing assets by liabilities.

1 points

QUESTION 8
1.

Choose the best statement regarding financial statement analysis:


Financial statement analysis has a predictive element because past performance is the

best indicator of future performance;


Financial statement analysis is best done with a scrying ball;
Financial statement analysis has specific limitations due to the data most often being
incomplete; or
Financial statement analysis is an interesting technique but has its limitations, mainly
because the data provided is after the fact.

1 points

QUESTION 9
1.

Choose the best statement regarding financial ratios:


Ratios, being calculated from published financial information, ought not be considered
in isolation but, rather, in combination;
Ratios, being calculated from published financial information, ought not be consolidated
in combination but, rather in isolation;
Ratios, being calculated from unpublished financial information, ought to be
considerered in combination; or
Ratios, being fabricated from unreliable financial information, ought not be considered
at all.

1 points

QUESTION 10
1.

Choose the best statement regarding financial ratios:


The current ratio is an infallible test because in the event that the firm is wound up, all
of its assets can be quickly and easily sold;
There is a uniform rule that a companys current ratio should adhere tothats how we
can tell whether the assets are indeed current;

The current ratio is arbitrary and should be interpreted with while considering other
ratios, there is not set rule on what it ought to be; or
The current ratio is fixed and will never change throughout the firms history.