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BMAL-590 BUSINESS FINANCE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS
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  • BMAL 590
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  • BMAL 590

BMAL-590 BUSINESS FINANCE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS Generally Accepted Accounting Principles (GAAP) a set of accounting standards that is used in the preparation of financial statements developed by the Financial Accounting Standards Board (FASB) Financial Accounting ...

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  • October 7, 2024
  • 44
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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BMAL-590 BUSINESS FINANCE EXAM QUESTIONS

AND ANSWERS WITH COMPLETE SOLUTIONS
Generally Accepted Accounting Principles (GAAP)


a set of accounting standards that is used in the preparation of financial statements



developed by the Financial Accounting Standards Board (FASB)


Financial Accounting Standards Board (FASB)


The primary accounting standard-setting body in the United States.



examines controversial accounting topics and issues standards that, in terms of their impact on

accounting practices, almost have the force of law.


Securities and Exchange Commission (SEC)


The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting

bodies.



regulates publicly traded U.S. companies as well as the nation's stock and bond markets. It mandates

that companies generate financial statements following international accounting standards (IAS)



The SEC requires four key financial statements:

(1) the balance sheet

(2) the income statement

,(3) the statement of retained earnings

(4) the statement of cash flows


Public Company Accounting Oversight Board (PCAOB)


The group charged with determining auditing standards and reviewing the performance of auditing

firms. It effectively gives the SEC authority to oversee the accounting profession's activities



Established by the Sarbanes-Oxley Act of 2002


International Financial Reporting Standards (IFRS)


used in many countries as the regulatory basis for the preparation of financial statements. They are

designed to provide a common global language for financial reporting, particularly in the European

Union, so published financial information is comparable across international boundaries.


A firm's balance sheet


presents a "snapshot" view of the company's financial position at a specific moment in time.



By definition, a firm's assets must equal the combined value of its liabilities and stockholders' equity.



The basic balance sheet equation is Assets = Liabilities + Stockholders' Equity. Thus, creditors and equity

investors finance all of a firm's assets.



The balance sheet consist of three sections that list a firm's assets and liabilities as well as the claims of

the stockholders.

,ssets and liabilities appear in descending order of liquidity,


Liquidity


The length of time it takes to convert accounts into cash during the normal course of business. The most

liquid asset (cash) appears first, and the least liquid (fixed assets) comes last.



Current assets are those that are easy to sell and turn into cash, while fixed assets are physical assets like

buildings and equipment.


Assets


include everything that can be used to benefit the business or give the company the right to receive

benefits


Current Liabilities


those that must be paid within one year and include accounts payable, notes payable, and accrued

expenses


Long-term liabilities


due after more than a year and include deferred taxes and long-term debt.


stockholders' equity


The last entry on the balance sheet, stockholders' equity is the owners' residual share of the business,

including their original investment plus any money the firm has earned and retained since its inception.



Stockholders' equity includes preferred stock, common stock, paid-in-capital in excess of par, and

, retained earnings. However, the net worth of the firm includes only the common stock, paid-in-capital in

excess of par, and retained earning.


Balance Sheet Assets


-organized in order of liquidity:



1. Current Assets

-includes all cash and items expected to be converted into cash in next 12 months

A. Cash and Equivalents - money market

B. Accounts Receivable - amounts due from customers

C. Inventory - cost of raw materials

D. Prepaid Expenses - rents, taxes, prepaid advertising



2. Fixed Assets

A. Property Plant and Equipment

-factories



3. Other Assets

A. Intangible Assets

-brand names, trademarks, formulas, etc


Cash and cash equivalents


assets such as checking account balances at commercial banks that can be used directly as means of

payment.


Marketable securities

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