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| 1 | |
A company will find investors willing to contribute capital when its auditor issues a qualified audit opinion. |
| | A) | True |
| | B) | False |
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| 2 | |
The board of directors of a corporation should be concerned about the negative impact of an unqualified audit opinion. |
| | A) | True |
| | B) | False |
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| 3 | |
The primary responsibility for the information in financial statements and related disclosures lies with the auditor or CPA. |
| | A) | True |
| | B) | False |
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| 4 | |
The firm's auditors are responsible for preparing earnings forecasts at the conclusion of their audit. |
| | A) | True |
| | B) | False |
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| 5 | |
Firms whose debt or equity securities are publicly traded are subject to Security and Exchange Commission (SEC) standards, as well as standards established by the Financial Accounting Standards Board (FASB). |
| | A) | True |
| | B) | False |
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| 6 | |
Managers of pension funds, mutual funds, and endowment, charitable foundations, and trust funds are known as institutional investors. |
| | A) | True |
| | B) | False |
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| 7 | |
The benefits derived from accounting and reporting information should outweigh the costs of obtaining such information. |
| | A) | True |
| | B) | False |
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| 8 | |
Relevant information must be consistent to be of use to decision makers. |
| | A) | True |
| | B) | False |
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| 9 | |
Reliable information is always relevant information. |
| | A) | True |
| | B) | False |
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| 10 | |
Consistent information can be compared over time. |
| | A) | True |
| | B) | False |
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| 11 | |
Consistent information means that similar accounting methods have been applied across companies. |
| | A) | True |
| | B) | False |
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| 12 | |
One of the major costs of required public financial disclosure is the potential loss of competitive advantage. |
| | A) | True |
| | B) | False |
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| 13 | |
One of the major purposes of a press release is to provide timely information to external users of a company's financial statements and reports. |
| | A) | True |
| | B) | False |
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| 14 | |
For privately held companies, annual reports are relatively simple and contain only the four basic financial statements. |
| | A) | True |
| | B) | False |
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| 15 | |
The annual report of a public company is normally split into a "nonfinancial" section and a "financial" section. |
| | A) | True |
| | B) | False |
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| 16 | |
Of the three reports (10-K, 10-Q, and 8-K) that publicly traded companies must file with the SEC, the Form 8-K is an annual report. |
| | A) | True |
| | B) | False |
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| 17 | |
Of the three reports (10-K, 10-Q, and 8-K) that publicly traded companies must file with the SEC, the Form 10-K is an annual report. |
| | A) | True |
| | B) | False |
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| 18 | |
Patents, copyrights, and franchises are examples of intangible assets. |
| | A) | True |
| | B) | False |
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| 19 | |
Deferred taxes are a result of the differences in the application of tax laws and GAAP for recording revenues and expenses. |
| | A) | True |
| | B) | False |
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| 20 | |
When a corporation sells and issues common stock at a price in excess of the par value per share of common stock, the excess is treated as retained earnings. |
| | A) | True |
| | B) | False |
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| 21 | |
Accumulated other comprehensive income includes, among other items, unrealized gains and losses on securities. |
| | A) | True |
| | B) | False |
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| 22 | |
The par value of common stock has a direct influence on the market value (price) of the common stock. |
| | A) | True |
| | B) | False |
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| 23 | |
If the debt-to-equity ratio is greater than 1, the creditors are providing more asset resources than are the stockholders. |
| | A) | True |
| | B) | False |
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| 24 | |
Interest expense is not included as an operating expense on the income statement. |
| | A) | True |
| | B) | False |
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| 25 | |
Income before taxes and operating income are synonymous terms. |
| | A) | True |
| | B) | False |
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| 26 | |
An item reported as an extraordinary item under "nonrecurring items" on the income statement is the result of an event that occurs infrequently but is not unusual. |
| | A) | True |
| | B) | False |
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| 27 | |
Of the three major sources (sections) of cash shown on the statement of cash flows, only the cash flow from operating activities is presented differently under the direct method than it is under the indirect method. |
| | A) | True |
| | B) | False |
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| 28 | |
One of the disadvantages of using GAAP for the preparation of financial statements is the rigidity of GAAP. |
| | A) | True |
| | B) | False |
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| 29 | |
The notion behind the conservatism constraint is that care should be taken to assure that assets and revenues are not overstated and expenses and liabilities are not understated. |
| | A) | True |
| | B) | False |
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| 30 | |
Recording a $25 pencil sharpener as an expense rather than as a fixed asset (it has the characteristics of a fixed asset: long life and physical existence), might be considered immaterial if the total assets of the company exceed 1 million dollars. |
| | A) | True |
| | B) | False |
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| 31 | |
Return on equity (ROE) is calculated by dividing net income by average stockholders' equity. |
| | A) | True |
| | B) | False |
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| 32 | |
A rapidly increasing ROE (return on equity) is always a very favorable trend. |
| | A) | True |
| | B) | False |
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| 33 | |
Managers can improve the ROE (return on equity) by improving one of three profit levers. |
| | A) | True |
| | B) | False |
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| 34 | |
One measurement of how many dollars of assets are employed for each dollar of stockholders' investment is the financial leverage ratio. |
| | A) | True |
| | B) | False |
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