BUSA 1010 S2 - Accounting

Gross profit is calculated by:

• Total revenue minus all expenses

• Revenue minus cost of goods sold

• Total assets minus total liabilities

• Sales revenue minus operating expenses

12. Current assets are those that:

• 12. Were purchased in the current year

• 12. Can be converted to cash within one year

• 12. Are currently being used in operations

• 12. Are listed first on the balance sheet

The statement of cash flows includes information about:

• Only operating activities

• Only investing activities

• Operating, investing, and financing activities

• Only financing activities

Which ratio measures a company's ability to pay immediate debts?

• Return on equity ratio

• Debt-to-equity ratio

• Current ratio

• Inventory turnover ratio

15. Operating expenses include:

• 15. Cost of raw materials

• 15. Cost of goods sold

• 15. Administrative and selling costs

• 15. Purchase of fixed assets

16. Return on equity measures:

• 16. How much debt a company has

• 16. How efficiently inventory is managed

• 16. How much profit is earned on shareholders' investment

• 16. How quickly customers pay their bills

17. Private accountants are:

• 17. Independent contractors

• 17. Government employees

• 17. Salaried employees of the firm they work for

• 17. Self-employed professionals

The matching principle states that:

• Assets must match liabilities

• Expenses should be matched with revenues in the same period

• Current assets must match current liabilities

• Income must match expenses exactly

19. Long-term solvency ratios measure:

• 19. Daily cash flow

• 19. Short-term debt payment ability

• 19. Operating efficiency

• 19. Ability to pay long-term debt obligations

Activity ratios measure:

• Employee productivity

• Management effectiveness

• How efficiently resources are being used

• Market share growth