FINMAN 21

Which of the following best describes the primary purpose of financial reporting?

• A) To provide detailed internal company processes.

• B) To show the company's financial performance to internal stakeholders only.

• C) To communicate a company’s financial activities and performance to investors, creditors, and other external parties.

• D) To exclusively track the company’s income for tax purposes.

2. The balance sheet reports a company’s financial position at a specific point in time. Which of the following is NOT one of the elements of a balance sheet?

• A. Assets

• B. Liabilities

• C. Owner's Equity

• D. Net Income

What is the fundamental accounting equation?

• Assets + Liabilities = Owner’s Equity

• Assets = Liabilities + Owner’s Equity

• Revenues - Expenses = Net Income

• Assets = Liabilities - Owner’s Equity

In the income statement, which of the following best describes "Revenues"?

• A) Outflows from delivering or producing goods or services.

• B) Inflows from the sale of equity or debt instruments.

• C) Inflows from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major operations.

• D) Gains that may or may not arise in the ordinary course of business.

Which financial statement reports the company’s cash receipts and payments over a period?

• A) Balance Sheet

• B) Income Statement

• C) Statement of Cash Flows

• D) Statement of Changes in Equity

Operating cash flows in the statement of cash flows include the cash effects of transactions that involve:

• A) Normal business operations of the firm.

• B) Issuance or retirement of the firm’s debt and equity securities.

• C) Acquisition or sale of property, plant, and equipment.

• D) All of the above.

The statement of changes in equity primarily reports:

• A) Cash flows from operating activities.

• B) The financial performance of the firm over time.

• C) The amounts and sources of changes in equity over a period.

• D) The financial position of the firm at a point in time.

What type of information is typically provided in financial statement notes?

• A) A summary of the company’s strategic objectives.

• B) Detailed information on items like business acquisitions, legal actions, and accounting methods used.

• C) The company’s operational procedures.

• D) A forecast of the company’s future profits.

According to the IASB Conceptual Framework for Financial Reporting, what is the primary objective of financial reporting?

• A) To determine the company’s tax liabilities.

• B) To provide information useful to investors, lenders, and other creditors in making economic decisions.

• C) To assess the company’s compliance with internal policies.

• D) To ensure accurate bookkeeping.

Which statement best describes the role of financial statement analysis?

• A) To present a company’s marketing strategies.

• B) To provide detailed instructions on company management.

• C) To analyze financial statements and other relevant information for economic decision-making.

• D) To prepare the company’s financial statements.