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| 1 | |
Write the formula for determining the financial leverage ratio, explain what it measures, and explain how a company's financial leverage ratio of 1:1 might be interpreted when compared to another company with a ratio of 1:75.
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| 2 | |
Explain the four accounting assumptions of (1) separate entity, (2) continuity, (3) unit of measure, and (4) time period.
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| 3 | |
What are the three elements of the balance sheet and how are they listed on the balance sheet?
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| 4 | |
Consider the following accounting assumptions, principles, and constraints.
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Historical cost |
Cost benefit | |
Continuity |
Time period | |
Materiality |
Separate entity | |
Conservatism |
Unit of measure |
From the list presented, identify and describe the accounting assumptions.
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| 5 | |
In accounting, how are the terms debit and credit used?
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| 6 | |
Consider the following transactions:
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1. |
Borrowed money from a lending institution. | |
2. |
Sold stock for cash. | |
3. |
Purchased plant and equipment for cash. | |
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Paid a cash dividend. | |
5. |
Purchased the stock of another company for cash. | |
6. |
Repaid money borrowed on a long-term note. | |
7. |
Received payment on a loan made to a company officer. |
Define financing activity and identify each transaction that is a financing activity.
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| 7 | |
Describe and give an example of an external event and an internal event.
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