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WorksheetsMidterm Exam Review (Business concepts) S2
Total questions: 50
Worksheet time: 25mins
What is accounting often called?
The language of business
The science of business
The history of business
The analysis of business
What is the primary purpose of accounting?
To prepare invoices
To provide financial information for decision-making
To manage human resources
To control production processes
What is a key function of an accounting system?
Marketing products
Summarizing financial transactions
Increasing sales
Negotiating supplier contracts
Which financial statement shows the financial position of a company at one point in time?
Income statement
Balance sheet
Statement of cash flows
Statement of retained earnings
What does the income statement reflect?
The financial performance over a period of time
The company's cash position
The inventory level at year-end
The company's liabilities
Which group of professionals uses accounting information for auditing and tax computations?
Private accountants
Public accountants
Internal auditors
Managers
Who may earn the title of CPA (Certified Public Accountant)?
Government accountants
Public accountants
Private accountants
Financial analysts
How do private accountants typically work?
Independently as contractors
For private companies
For the government
As freelance consultants
How are government accountants typically compensated?
Hourly wage
Fixed commission
Salary basis
Per project fee
What is the outcome of an effective accounting system?
Higher sales
Accurate and timely financial information
Increased taxes
Reduced production costs
What is the balance sheet?
A summary of financial performance over time
A snapshot of what a company owns and owes at a specific point in time
A report of cash inflows and outflows
A list of all financial transactions for the year
What are assets?
Debts owed by a business
Everything of value that is owned by a business
Services provided by employees
Costs incurred during production
What do liabilities represent?
Company profits
Debts owed to suppliers and creditors
Owners' equity in the company
Operational expenses
How is equity calculated on the balance sheet?
Assets - Liabilities
Assets + Liabilities
Liabilities - Assets
Liabilities + Revenues
What is another term for owners' equity?
Working capital
Gross profit
Stockholders' equity
Current assets
Which of the following is true about the accounting equation?
It only applies to large corporations
Assets must always equal liabilities plus owners' equity
It does not consider long-term liabilities
It only applies to manufacturing companies
Which of the following is an example of a current asset?
Equipment
Cash
Buildings
Bonds payable
Which is a characteristic of fixed assets?
Easily converted to cash
Long-term in nature
Incurred as short-term debt
Cash equivalent
What does the liabilities section of the balance sheet include?
Only current liabilities
Both current and long-term liabilities
Only long-term liabilities
Operating expenses
What information does the balance sheet provide for investors?
A company's market share
A company's financial position
Sales forecasts for the next quarter
A company's strategic goals
What is one of the primary considerations when starting a business?
Location
Staffing
Money
Technology
What is capital?
Revenue generated from sales
The money needed to start and continue operating a business
The total number of employees
The market value of a company
What are some of the assets that capital can be used to purchase?
Customer lists
Inventories, equipment, and buildings
Social media accounts
Employee benefits
What is financial management?
Managing a company's marketing efforts
Securing and utilizing capital to start up, operate, and expand a business
Setting product prices
Managing customer relationships
Which of the following is NOT a day-to-day operational cost covered by capital?
Salaries
Research and development
Advertising
Long-term liabilities
Why is capital investment in new products and techniques important?
It helps the company comply with government regulations
It ensures competitiveness in the market
It reduces the company's tax liability
It prevents short-term financing needs
What is short-term capital typically used for?
Long-term investments
Items that last a short period of time
Building expansion
Equipment that will last many years
Which is an example of long-term capital for an individual?
Credit card payments
Buying groceries
Taking out a mortgage for a home
Paying utility bills
How long does short-term financing typically last?
Less than one year
One to three years
Five to ten years
Over ten years
Which type of financing is often used for long-term investments?
Short-term financing
Credit card financing
Long-term financing
Trade credit
What is the process of acquiring capital for a business called?
Cost accounting
Financing
Budgeting
Auditing
Which of the following is a type of equity financing?
Taking a loan from a bank
Selling shares of stock
Borrowing money from a friend
Issuing bonds
What does equity financing refer to?
Borrowing money from external sources
Funds invested by owners of the corporation
Selling company assets
Paying off debt
What is a stockholder also known as?
Borrower
Creditor
Shareholder
Investor
What risk do buyers take when purchasing initial shares of stock?
That the stock will not pay dividends
That the company has no record of performance
That the company will issue too many shares
That the government will regulate stock prices
What do dividends represent?
A company's retained earnings
Proportional amounts of profit paid to stockholders
The company's total liabilities
The capital gained from issuing stock
What happens to stockholders if the corporation is not successful?
They receive a return on their investment
They may lose some or all of their initial stock investment
They become debt holders
They are forced to sell their stock at a lower price
What is an example of debt financing?
Issuing shares of stock
Selling corporate bonds
Reinvesting company profits
Selling equipment
What does a corporation owe to bondholders?
Dividends
Interest and repayment of the loan
Shares of stock
Company assets
What happens if a corporation fails to meet its obligations to bondholders?
The bondholders take over the company
The company is forced to sell its assets to make payments
The bondholders lose their investment
The company is dissolved
Which of the following best describes debt financing?
Raising funds by selling ownership in the company
Borrowing funds from external sources
Retaining company profits for future use
Investing in company assets
Why might a corporation choose debt financing over equity financing?
To maintain ownership control
To increase dividend payments
To lower stock prices
To avoid repaying debt
How is the repayment structure of a corporate bond typically set up?
Fixed interest payments and repayment of the principal at maturity
Dividend payments to shareholders
Variable interest payments based on stock price
Monthly payments like a loan
What is the main benefit of using equity financing for a corporation?
The corporation doesn't need to repay the funds
The corporation can increase its debt load
The corporation avoids issuing bonds
The corporation earns interest on the capital raised
Which of the following is NOT typically associated with equity financing?
Selling shares of stock
Paying dividends to stockholders
Issuing bonds
Attracting investors
What is the main difference between equity financing and debt financing?
Equity financing involves borrowing money
Equity financing does not require repayment
Debt financing involves issuing stock
Debt financing avoids paying interest
How do stockholders benefit if a corporation performs well?
Through increased company liabilities
Through higher dividends and increased stock value
By receiving a portion of the company's debts
By being shielded from any losses
Which of the following is a long-term liability?
Accounts payable
Short-term loans
Corporate bonds
Cash reserves
How is the capital acquired through debt financing typically used?
To pay for operational expenses
To invest in long-term assets and expansion
To distribute to stockholders as dividends
To buy back company stock
Which of the following is a benefit of long-term financing?
It must be repaid within one year
It allows the company to acquire assets for future expansion
It avoids any interest payments
It reduces the company's equity
