#1
Which of the following is an example of a current asset?
Inventory
ExplanationAssets expected to be converted into cash or used up within a year.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasure of profitability relative to investment.
#3
Which of the following is NOT a component of the Cash Flow Statement?
Revenue activities
ExplanationCash flow statement components include operating, investing, and financing activities.
#4
What is the formula for calculating Net Income?
Total Revenue - Total Expenses
ExplanationMeasure of profit after subtracting all expenses from revenue.
#5
What is the purpose of the Generally Accepted Accounting Principles (GAAP)?
To provide guidelines for financial reporting
ExplanationStandardized rules and procedures for financial accounting and reporting.
#6
Which accounting principle states that expenses should be recognized in the same period as the revenues to which they relate?
Matching principle
ExplanationExpenses should be recorded when incurred to match with related revenues.
#7
What is the formula for calculating the debt-to-equity ratio?
Total Liabilities / Total Assets
ExplanationIndicates the proportion of debt financing relative to equity.
#8
Which of the following is considered a long-term liability?
Mortgage Payable
ExplanationObligations due beyond one year.
#9
What does the term 'EBITDA' stand for?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationMeasure of a company's operating performance.
#10
What is the primary purpose of the double-entry accounting system?
To ensure accurate recording of financial transactions
ExplanationEach transaction recorded with at least two entries to maintain balance.
#11
Which financial statement shows a company's revenues and expenses over a period of time?
Income statement
ExplanationSummarizes financial performance over a specified period.
#12
Which accounting method records revenues and expenses as they are earned or incurred, regardless of when cash is exchanged?
Accrual basis accounting
ExplanationRevenue and expenses recognized when earned or incurred, not when cash is received or paid.
#13
In the context of financial analysis, what does the term 'liquidity' refer to?
The ability to meet short-term obligations
ExplanationMeasure of a company's ability to meet short-term debts.
#14
Which accounting standard-setting body is responsible for issuing International Financial Reporting Standards (IFRS)?
International Accounting Standards Board (IASB)
ExplanationDevelops and publishes International Financial Reporting Standards.
#15
What is the purpose of the statement of retained earnings?
To explain changes in a company's equity over a period of time
ExplanationDetails changes in retained earnings over a specified period.