ACC 561 FINAL EXAM
1. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
Most common form of organization.
*Reduced legal liability for investors.
Lower taxes.
Harder to transfer ownership.
2. The group of users of accounting information charged with achieving the goals of the business is its
2. The group of users of accounting information charged with achieving the goals of the business is its
creditors.
*managers.
auditors.
investors.
3. Which of the following financial statements is concerned with the company at a point in time?
3. Which of the following financial statements is concerned with the company at a point in time?
Retained Earnings statement.
Statement of cash flows.
*Balance sheet.
Income statement.
4. An income statement
4. An income statement
reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
summarizes the changes in retained earnings for a specific period of time.
reports the assets, liabilities, and stockholders’ equity at a specific date.
*presents the revenues and expenses for a specific period of time.
5. The most important information needed to determine if companies can pay their current obligations is the
5. The most important information needed to determine if companies can pay their current obligations is the
net income for this year.
relationship between short-term and long-term liabilities.
*relationship between current assets and current liabilities.
projected net income for next year.
6. A liquidity ratio measures the
percentage of total financing provided by creditors.
income or operating success of a company over a period of time.
*short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
ability of a company to survive over a long period of time.
7. The convention of consistency refers to consistent use of accounting principles
7. The convention of consistency refers to consistent use of accounting principles
among firms.
throughout the accounting periods.
*among accounting periods.
within industries.
8. Horizontal analysis is also known as
8. Horizontal analysis is also known as
common size analysis.
*trend analysis.
linear analysis.
vertical analysis.
9. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time
9. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time
that has been arranged from the lowest number to the highest number.
*to determine the amount and/or percentage increase or decrease that has taken place.
to determine which items are in error.
that has been arranged from the highest number to the lowest number.
10. Vertical analysis is a technique that expresses each item in a financial statement
10. Vertical analysis is a technique that expresses each item in a financial statement
as a percent of the item in the previous year.
*as a percent of a base amount.
in dollars and cents.
starting with the highest value down to the lowest value.
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