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1)
Which of the following statements (in general) is CORRECT?
- A) A low receivables turnover is desirable
- B) The lower the total debt-to-equity ratio, the lower the financial risk for a firm
- C) An increase in net profit margin with no change in sales or assets means a weaker ROI
- D) The higher the tax rate for a firm, the lower the interest coverage ratio
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2)
Oliver Incorporated has a current ratio equal to 1.6 and a quick ratio equal to 1.2. The company has Rs. 2 million in sales and its current liabilities are Rs. 1 million. what is the value of company's current assets?
- A) 1,600,000
- B) 1,200,000
- C) 3,200,000
- D) 2,400,000
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3)
Which one of the following statements is TRUE regarding distributions to stockholders?
- A) The payment of dividends is not directly related to the profits of a given peri
- B) Shareholders can individually decide on their distributions
- C) To receive a corporate dividend, stock must be owned on the date of declaration
- D) Corporate dividends reduce contributed capital and therefore, stockholders’ equity
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4)
Cash flow relating to investing activities does NOT present the cash effects of which of the following?
- A) Plant assets
- B) Intangible assets
- C) Investments
- D) Debt financing
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5)
Office supplies are purchased on account. The company uses a perpetual inventory system. What is the correct journal entry for this purchase of office supplies?
- A) Debit - Purchases; Credit - Cash
- B) Debit - Merchandise Inventory; Credit - Cost of Goods Sold
- C) Debit - Office Supplies; Credit - Accounts Payable
- D) Debit - Merchandise Inventory; Credit - Accounts Payable
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6)
Which of the following is NOT true about the specific identification method?
- A) It requires a very detailed physical count
- B) This method allows management to easily manipulate ending inventory cost
- C) This method is very hard to use on interchangeable goods
- D) This results in an overstated inventory account during the period of inflation
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7)
Which of the following statements best describes the nature of depreciation?
- A) Regular reduction of asset value to correspond to the decline in market value as the asset ages
- B) A process of correlating the book value of an asset with its gradual decline in physical efficiency
- C) Allocation of the cost in a manner that will ensure that plant and equipment items are not carried on the balance sheet at amounts in excess of net realizable value
- D) Allocation of the cost of a plant asset to the periods in which benefits are received
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8)
Warner Corporation reported net income in excess of its net cash flow from operations. A possible explanation of this difference is:
- A) Depreciation expense
- B) Non operating gains
- C) A decrease in income tax rates
- D) A decrease in accounts receivable over the period
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9)
Which of the following opinions state that the financial statements do not present fairly the financial position, results of operations etc, in conformity with GAAP?
- A) Unqualified opinion
- B) Qualified opinion
- C) adverse opinion
- D) Disclaimer of opinion
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10)
In a statement of cash flows, the acquisition of land by issuing capital stock:
- A) Is not shown at all, since no cash was received or disbursed
- B) Is shown as an investing activity
- C) Is shown as a financing activity
- D) Is shown in a supplementary schedule as a non-cash investing and financing transaction
