#1
Which of the following is an example of a current asset?
Accounts receivable
ExplanationAssets expected to be converted into cash within a year.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasure of profitability, indicating how efficiently investments generate profits.
#3
What does the acronym GAAP stand for in accounting?
Generally Accepted Accounting Principles
ExplanationStandard framework of guidelines for financial accounting.
#4
Which financial statement shows a company's financial position at a specific point in time?
Balance sheet
ExplanationSummarizes a company's assets, liabilities, and equity at a given time.
#5
What is the purpose of the statement of cash flows?
To show how changes in balance sheet accounts and income affect cash and cash equivalents
ExplanationSummarizes cash inflows and outflows from operating, investing, and financing activities.
#6
Which financial statement shows a company's revenues and expenses?
Income statement
ExplanationSummarizes a company's financial performance over a specific period.
#7
What is the formula to calculate the debt-to-equity ratio?
Total debt / Total equity
ExplanationIndicator of a company's financial leverage and risk.
#8
What is the purpose of double-entry bookkeeping?
To track both income and expenses
ExplanationSystem to record financial transactions in which every transaction affects at least two accounts.
#9
Which of the following is NOT a component of the time value of money?
Revenue
ExplanationTime value of money involves principles of interest and inflation, not revenue generation.
#10
What is depreciation in accounting?
The process of writing off the cost of assets over their useful lives
ExplanationSystematic allocation of the cost of tangible assets over their useful lives.
#11
What does the term 'EBITDA' stand for in finance?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationIndicator of a company's operating performance.
#12
What is the purpose of the accrual accounting method?
To record transactions when they occur, regardless of when cash is exchanged
ExplanationRecognizes revenue and expenses when they are incurred, not when cash is exchanged.
#13
What is the purpose of a budget in financial management?
To estimate future income and expenses
ExplanationPlan for income and spending over a specific period, aiding in financial control and decision-making.
#14
What is the purpose of the FASB (Financial Accounting Standards Board)?
To establish and improve financial accounting and reporting standards
ExplanationAuthority responsible for setting accounting standards in the United States.
#15
What is the purpose of the International Financial Reporting Standards (IFRS)?
To provide a global framework for accounting standards
ExplanationGuidelines ensuring consistency and comparability in financial reporting across borders.