#1
Which of the following financial statements reports a company's revenues and expenses?
Income Statement
ExplanationReports company's financial performance over a specific period.
#2
What is the accounting equation?
Assets = Liabilities + Equity
ExplanationFundamental equation representing a company's financial position.
#3
What is the primary objective of financial accounting?
To record and report financial transactions for external users
ExplanationProvides information to external parties for decision-making.
#4
What does ROA stand for in finance?
Return on Assets
ExplanationIndicator of a company's profitability relative to its assets.
#5
Which financial statement shows a company's financial position at a specific point in time?
Balance Sheet
ExplanationLists company's assets, liabilities, and equity at a specific date.
#6
Which of the following is NOT a component of the Statement of Cash Flows?
Non-operating Activities
ExplanationRepresents activities unrelated to company's core operations.
#7
Which of the following is not a component of working capital?
Accounts Payable
ExplanationAccounts Payable represents a liability, not a part of working capital.
#8
What does EBITDA stand for?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationMeasure of a company's operating performance.
#9
What does FIFO stand for in accounting?
First In, First Out
ExplanationInventory valuation method where oldest inventory is sold first.
#10
Which of the following is an example of a long-term liability?
Notes Payable due in 6 months
ExplanationLong-term liability with a maturity period beyond one year.
#11
Which accounting principle requires that expenses be recorded when they are incurred, regardless of when cash is paid?
Matching Principle
ExplanationEnsures expenses are matched with the revenues they generate.
#12
What is the purpose of the accrual basis of accounting?
To record revenues and expenses when they are earned or incurred
ExplanationMatches revenues and expenses with their respective periods.
#13
Which financial ratio measures a company's ability to meet its short-term obligations with its most liquid assets?
Current Ratio
ExplanationIndicates company's liquidity and ability to cover short-term debts.
#14
What does the term 'EBITDA' stand for in finance?
Earnings Before Income, Taxes, Depreciation, and Amortization
ExplanationIndicator of company's operating performance.