Test Bank For Financial
AccountingFor Mbas 8th Edition
By Easton And John Wild
, Module 1
Financial Accounting For Mbas
Learning Objectives – Coverage By Question
True/False Multiple Choice
LO1 – Explain And Assess The Four Main
BusinessActivities.
LO2 – Identify And Discuss The Users And Suppliers
1- 4 1, 2
OfFinancial Statement Information.
LO3 – Describe And Examine The Four
5-10 3-19
Financial Statements, And Define The
Accounting Equation.
LO4 – Explain And Apply The Basics Of
11-13 20-25
ProfitabilityAnalysis.
LO5 – Assess Business Operations Within The
14 26, 27
ContextOf A Competitive Environment.
LO6 – Access Reports Filed With The SEC
(Appendix1A).
LO7 – Describe The Accounting Principles And
Regulations That Frame Financial Statements 15 28-30
(Appendix1B).
These Questions Are Available To Assign In Mybusinesscourse.
,Module 1: Financial Accounting for MBAs
True/False
Topic: Users Of Financial Statement
InformationLO: 2
1. Shareholders Demand Financial Information Primarily To Assess Profitability And Risk Whereas
BankersDemand Information Primarily To Assess Cash Flows To Repay Loan Interest And Principal.
ACCURATE ANSWER: True
Rationale: While Both Shareholders And Bankers Are Interested In All The Information Companies
Provide, Shareholders Care About More About A Company’s Profitability And Bankers Care More
About Solvency And Creditworthiness.
Topic: Publicly Available Financial Reports
LO: 2
2. Publicly Traded Companies Are Required To Provide Quarterly Financial Reports Directly To The Public.
ACCURATE ANSWER: False
Rationale: Companies Provide Electronic Versions Of Quarterly Financial Statements To The SEC,
Which Posts Them To The Internet For The Public To Access Them.
Topic: Users Of Financial Statement
InformationLO: 2
3. Publicly Traded Companies Provide Financial Information Primarily To Satisfy The SEC And
The TaxAuthorities (That Is, The Internal Revenue Service).
ACCURATE ANSWER: False
Rationale: Demand For Information Extends To Many Users; The Regulators Such As The SEC And
The IRS Are Only One Class Of Users.
Topic: SEC Filings
LO: 2
4. Publicly Traded Companies Must Provide To The Securities Exchange Commission Annual
AuditedFinancial Statements (10-K Reports) And Quarterly Audited Financial Statements (10-Q
Reports).
ACCURATE ANSWER: False
Rationale: Quarterly Reports Do Not Need To Be Audited.
Topic: Balance Sheet
LO: 3
5. If A Company Reports Retained Earnings Of $175.3 Million On Its Balance Sheet, It Must Also Report
$175.3 Million In Cash.
ACCURATE ANSWER: False
Rationale: The Accounting Equation Requires Total Assets To Equal Total Liabilities Plus
Stockholders’ Equity. That Does Not Imply, However, That Liability And Equity Accounts Relate
Directly To Specific Assets.
, Topic: Balance Sheet
LO: 3
6. A Balance Sheet Shows A Company’s Position Over A Period Of Time, Whereas An Income
Statement,Statement Of Stockholders’ Equity, And Statement Of Cash Flows Show Its Position At A
Point In Time.
ACCURATE ANSWER: False
Rationale: The Statement Is Reversed: A Balance Sheet Shows A Company’s Position At A Point In
Time, Whereas An Income Statement, Statement Of Equity, And Statement Of Cash Flows Show
Its PositionOver A Period Of Time.
Topic: Accounting Equation
LO: 3
7. Assets Must Always Equal Liabilities Plus Equity.
ACCURATE ANSWER: True
Rationale: The Accounting Equation Is Assets = Liabilities + Equity. This Relation Must Always Hold.
Topic: Income Statement
LO: 3
8. The Income Statement Reports Net Income Which Is Defined As The Company’s Profit After All
Expenses And Dividends Have Been Paid.
ACCURATE ANSWER: False
Rationale: The Statement Contains Two Errors. First, Net Income Does Not Include Any Dividends
During The Period; These Are A Distribution Of Profits And Not Part Of Its Calculation. Second, The
Income Statement Is Prepared On An Accrual Basis And Thus Includes Expenses Incurred (As
Opposed To Paid).
Topic: Statement Of Cash
FlowsLO: 3
9. A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing And Financing
Activities At APoint In Time.
ACCURATE ANSWER: False
Rationale: A Statement Of Cash Flows Reports On Cash Flows For Operating, Investing, And
Financing Activities Over A Period Of Time.
Topic: Statement Of Stockholders’
EquityLO: 3
10. An Increase In Common Stock Would Be Reflected In The Statement Of Stockholders’ Equity.
ACCURATE ANSWER: True
Rationale: The Statement Of Stockholders’ Equity Reports On Changes In The Accounts That Make
Up Stockholders’ Equity. This Includes Contributed Capital, Retained Earnings, And Other Equity.
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