WorksheetsFinancial Statements Quiz
Total questions: 15
Worksheet time: 8mins
Why do investment analysts typically want to see a company's financial statements?
To evaluate the business's competitive strategies
To assess the ability of the company to pay taxes
To determine the company's credit rating
To decide whether to recommend the company's securities to clients
Why might a union request financial statements from a business?
To evaluate the business's competitive strategies
To determine the creditworthiness of the business
To assess the ability to pay compensation and benefits to union members
To decide whether to invest in the business
When will the reported results in financial statements be suspicious, potentially due to fraud from the below mentioned cases?
When the results are consistent with industry norms.
When there is a sudden spike in sales.
When the statements are audited.
When non-financial issues are addressed.
What is a key difference between US GAAP and IFRS regarding the treatment of research and development costs?
US GAAP capitalizes all research and development costs and IFRS expenses all research and development costs.
US GAAP expenses all research and development costs and IFRS capitalizes all research and development costs.
Both US GAAP and IFRS expense all research and development costs.
Both US GAAP and IFRS expense research and development costs, however; IFRS capitalizes development costs in certain situations.
What happens to the values of assets and liabilities in the balance sheet when financial statements are not adjusted for inflation?
They appear inordinately high.
They appear inordinately low.
They remain unchanged.
They become irrelevant.
What is the primary purpose of employee's interest in reviewing the financial statements of their current company?
To help employees assess the ability of the enterprise to provide remuneration
To determine the business's credit rating
To involve employees in the financial decision-making process
To help employees decide whether to buy company securities
Why are financial statements of different companies not always comparable?
They lack auditors' opinions.
They use different accounting practices.
They have not been verified.
They do not cover non-financial issues.
Why financial statements might underestimate the value of a business, for instance for startups with intellectual property?
They do not account for inflation.
They do not include tangible assets.
They immediately expense intangible asset expenditures and do not record them as assets.
They only cover a specific period of time.
Which users of the financial statements read the financials to understand the profitability, liquidity, and cash flows of the organization?
Company Management
Competitors
Customers
Employees
Which of the following should be disclosed in a summary of significant accounting policies?
A. Basis of consolidation.
B. Concentration of credit risk of financial instruments.
C. Composition of plant assets.
D. Adequacy of pension plan assets in relation to vested benefits.
What is the primary objective of financial reporting?
A. To provide economic information that is comprehensible to all users.
B. To provide management with an accurate evaluation of their financial performance.
C. To provide forecasts for future cash flows and financial performance.
D. To provide information that is useful for economic decision making.
Which of the following is not a right of a common stockholder?
A. Right to share in the profits and losses of the corporation.
B. Right to dividends each year.
C. Right to a share in the company's assets at the time of liquidation.
D. Right to vote.
A financial statement includes all of the following items: net income, depreciation, operating activities, and financing activities. What financial statement is this?
A. Balance sheet.
B. Income statement.
C. Statement of cash flows.
D. Statement of changes in stockholders' equity.
Which of the following is the best definition of the going concern concept?
A. The entity will continue in existence forever.
B. The entity will continue to make profits for the foreseeable future.
C. The entity will continue in operational existence for the foreseeable future.
D. The entity will not incur losses in the next three years.
A public entity sells steel for use in construction. One of its customers' accounts for 43% of sales, and another customer accounts for 40% of sales. What should the entity disclose in its annual financial statements about these two customers?
A. The payment terms of accounts receivable due from each of the two customers.
B. The amount of the entity's revenue from each of the two customers.
C. The names of the two customers.
D. The financial condition of the two customers.
