Asset Management and Capitalization Principles Quiz

Test your knowledge on asset management with questions covering capitalization, depreciation, ROA, and more. Perfect for finance enthusiasts!

Practice Learn Test

Which of the following is considered a tangible asset?

Patent

Trademark

Building

What is the primary objective of asset management?

Maximizing liabilities

Minimizing profits

Maximizing shareholder value

Minimizing assets

Which of the following is an intangible asset?

Inventory

Land

Goodwill

Machinery

Which financial statement would you typically find information about assets?

Income statement

Cash flow statement

Balance sheet

Statement of retained earnings

Which of the following is an example of a current asset?

Land

Equipment

Accounts receivable

Buildings

Which of the following is NOT a capitalization principle?

Materiality

Conservatism

Consistency

Matching

What does the 'matching principle' in capitalization refer to?

Matching assets with liabilities

Matching revenues with expenses

Matching variable costs with fixed costs

Matching short-term investments with long-term investments

What is the formula to calculate Return on Assets (ROA)?

Net Income / Average Total Assets

Total Assets / Net Income

Net Income / Total Assets

Average Total Assets / Net Income

What does the term 'asset turnover ratio' measure?

The efficiency of utilizing assets to generate revenue

The ratio of liabilities to assets

The rate at which assets depreciate

The ratio of equity to assets

#10

Which of the following is NOT a characteristic of a capital asset?

Long-term in nature

Used in day-to-day operations

Purchased for business purposes

Expected to provide benefits over multiple accounting periods

#11

Which depreciation method spreads the cost evenly over the useful life of an asset?

Straight-line depreciation

Double-declining balance depreciation

Units of production depreciation

Sum-of-the-years'-digits depreciation

#12

What does the capitalization of interest involve?

Treating interest as an expense on the income statement

Treating interest as a liability on the balance sheet

Including interest in the cost of acquiring or producing assets

Distributing interest as dividends to shareholders

#13

What is the purpose of capitalizing interest?

To reduce the interest expense

To increase the company's liquidity

To spread the interest cost over the useful life of an asset

To decrease the company's liabilities

#14

Which of the following depreciation methods results in higher depreciation expense in the earlier years of an asset's life?