,TEST BANK FOR FINANCIAL
f f ACCOUNTING FOR MBAs 8th Edition
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Easton
Module 1 f
FinancialAccountingforMBAs f f f
Learning Objectives – Coverage by question f f f f f
True/False Multiple Choice
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LO1 – Explain and assess the four main business
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activities.
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LO2 – Identify and discuss the users and suppliers of
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1- 4 f 1, 2
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financial statement information.
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LO3 – Describe and examine the four financial
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5-10 3-19
statements, and define the accounting equation.
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LO4 – Explain and apply the basics of profitability
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11-13 20-25
analysis.
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LO5 – Assess business operations within the context of
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a competitive environment.
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LO6 – Access reports filed with the SEC (Appendix 1A).
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LO7 – Describe the accounting principles and
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regulations that frame financial statements (Appendix
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1B).
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These questions are available to assign in myBusinessCourse.
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© fCambridge fBusiness fPublishers, f2021
1-1 Financial fAccounting ffor fMBAs, f8th fEdition
,Module 1: Financial Accounting for MBAs
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True/False
Topic: Users of Financial Statement Information
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LO: 2
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1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
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demand information primarily to assess cash flows to repay loan interest and principal.
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Answer: True f
Rationale: While both shareholders and bankers are interested in all the information companies
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provide, shareholders care about more about a company’s profitability and bankers care more about
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solvency and creditworthiness.
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Topic: Publicly Available Financial Reports
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LO: 2
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2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
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Answer: False f
Rationale: Companies provide electronic versions of quarterly financial statements to the SEC, which
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posts them to the Internet for the public to access them.
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Topic: Users of Financial Statement Information
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LO: 2
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3. Publicly traded companies provide financial information primarily to satisfy the SEC and the
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tax authorities (that is, the Internal Revenue Service).
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Answer: False f
Rationale: Demand for information extends to many users; the regulators such as the SEC and the IRS
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are only one class of users.
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Topic: SEC Filings
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LO: 2
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4. Publicly traded companies must provide to the Securities Exchange Commission annual
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audited financial statements (10-K reports) and quarterly audited financial statements (10-Q reports).
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Answer: False f
Rationale: Quarterly reports do not need to be audited.
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Topic: Balance Sheet
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LO: 3
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5. If a company reports retained earnings of $175.3 million on its balance sheet, it must also report
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$175.3 million in cash. f f f
Answer: False f
Rationale: The accounting equation requires total assets to equal total liabilities plus stockholders’
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equity. That does not imply, however, that liability and equity accounts relate directly to specific assets.
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© fCambridge fBusiness fPublishers, f2021
Test fBank f(T/F f& fMC), fModule f1 1-2
, Topic: Balance Sheet
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LO: 3
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6. A balance sheet shows a company’s position over a period of time, whereas an income statement,
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statement of stockholders’ equity, and statement of cash flows show its position at a point in time.
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Answer: False f
Rationale: The statement is reversed: A balance sheet shows a company’s position at a point in time,
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whereas an income statement, statement of equity, and statement of cash flows show its position over
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a period of time.
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Topic: Accounting Equation
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LO: 3
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7. Assets must always equal liabilities plus equity.
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Answer: True f
Rationale: The accounting equation is Assets = Liabilities + Equity. This relation must always hold.
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Topic: Income Statement
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LO: 3
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8. The income statement reports net income which is defined as the company’s profit after all expenses
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and dividends have been paid.
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Answer: False f
Rationale: The statement contains two errors. First, net income does not include any dividends during
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the period; these are a distribution of profits and not part of its calculation. Second, the income
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statement is prepared on an accrual basis and thus includes expenses incurred (as opposed to paid).
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Topic: Statement of Cash Flows
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LO: 3
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9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a
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point in time.
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Answer: False f
Rationale: A statement of cash flows reports on cash flows for operating, investing, and financing
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activities over a period of time.
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Topic: Statement of Stockholders’ Equity
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LO: 3
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10. An increase in common stock would be reflected in the statement of stockholders’ equity.
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Answer: True f
Rationale: The statement of stockholders’ equity reports on changes in the accounts that make up
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stockholders’ equity. This includes contributed capital, retained earnings, and other equity.
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© fCambridge fBusiness fPublishers, f2021
1-3 Financial fAccounting ffor fMBAs, f8th fEdition
