Accounting Basics Quiz

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Questions and Answers

Which of the following are included in financial statements?

Balance Sheet (correct)

Income Statement (correct)

Operational Budget

Cash Flow Statement (correct)

What is the primary purpose of the cash flow statement?

To monitor cash inflow and outflow (correct)

To track liabilities of the business

To show profitability over time

To provide tax-related financial data

Which area of accounting is responsible for preparing internally circulated reports?

Governmental Accounting

Managerial Accounting (correct)

Tax Accounting

Financial Accounting

Which financial statement would provide information on the company's net earnings?

Income Statement Signup and view all the answers

What are the three forms of accounting discussed?

Financial, Managerial, and Governmental Signup and view all the answers

What is the percentage of Gross Margin expressed in relation to Net Sales for XYZ Corporation?

80.49% Signup and view all the answers

How is Return on Sales calculated?

Net profit divided by net sales revenue Signup and view all the answers

What does the Break-even point measure?

The total sales needed to cover fixed costs Signup and view all the answers

Which of the following indicates the percentage of Net Income relative to Net Sales for XYZ Corporation?

36.94% Signup and view all the answers

Which calculation helps determine when a product will reach its break-even point?

Payback period Signup and view all the answers

Which of these is classified as an intangible asset?

Goodwill Signup and view all the answers

What distinguishes long-term liabilities from short-term liabilities?

Long-term liabilities are not due for at least one year. Signup and view all the answers

Which component does NOT belong to the owner's equity section?

Mortgages Signup and view all the answers

Which of the following is an example of a current liability?

Credit card debt Signup and view all the answers

What is the gross margin derived from the given sales revenue and cost of goods sold?

$26,566.6 million Signup and view all the answers

What is the primary purpose of pro forma statements?

To compare actual amounts against budgeted amounts. Signup and view all the answers

Which of the following is NOT a type of asset?

Retained earnings Signup and view all the answers

Which figure represents the net cash from investing activities?

($2,270.8 million) Signup and view all the answers

Which statement correctly describes retained earnings?

It represents the profit not distributed as dividends. Signup and view all the answers

What does the income statement primarily focus on?

Profitability of the firm Signup and view all the answers

How is the net marketing contribution derived?

Gross margin minus advertising and promotion expenses Signup and view all the answers

Which of the following is a characteristic of non-current assets?

They typically hold value for more than one year. Signup and view all the answers

What is the net increase in cash and cash equivalents reported?

$733.1 million Signup and view all the answers

Which of the following activities is associated with net cash from financing activities?

Transactions related to stocks, bonds, and loans Signup and view all the answers

In the provided figures, what amount accounts for advertising and promotion expenses?

$1,441.3 million Signup and view all the answers

What is the result of subtracting cost of goods sold from sales revenue?

Gross margin Signup and view all the answers

What is the operating income calculated from the net marketing contribution and operating expenses?

$7,314.6 million Signup and view all the answers

What are the total liabilities reported on the balance sheet?

$37,443.3 million Signup and view all the answers

What is included in the calculation of net income?

Operating income and interest Signup and view all the answers

What characterizes current assets on the balance sheet?

Items that can be converted into cash in less than a year Signup and view all the answers

What is the sum of current and non-current assets as reported on the balance sheet?

$29,445.5 million Signup and view all the answers

How much is the retained earnings reported in the liabilities and shareholder's equity section?

($8,037 million) Signup and view all the answers

What must the sum of liabilities and owner's equity equal according to accounting principles?

Total assets Signup and view all the answers

Depreciation, interest, and taxes affect which financial metric?

Net income Signup and view all the answers

Study Notes

Learning Objectives

Define revenue, costs, and profitability
Explain the three forms of accounting
Interpret entries on the three financial statements
Use formulas to calculate financial ratios
Differentiate types of expenses and liabilities

Accounting Areas

Financial: Reports data in the form of standard financial statements to external sources
Managerial: Prepares internally circulated reports and creates forecasts
Governmental: Ensures fees and taxes are paid at the local, state, or federal level

Financial Statements

Cash Flow Statement: Tracks cash inflows and outflows, separated by operating, investing, and financial activities
Income Statement: Shows the firm's profitability, starting with revenue and subtracting costs of goods sold to determine gross margin. Expenses are deducted to arrive at net income.
Balance Sheet: Represents the assets, liabilities, and owners' equity of a business. Assets must equal the sum of liabilities and equity.

Applying the Financial Statements

Monetary Control: Ensures only spending money available
Pro Forma Statements: Organize entries by revenue and expenses, comparing projected and actual amounts to the budget.
Profit and Loss (P&L) Statements: Shows the actual amounts compared to the budgeted amounts, expressed in relation to sales revenue.

Important Ratios & Calculations

Return on Sales: Net profit divided by net sales revenue
Return on Investment: Net profit divided by investment amount
Breakeven: Total fixed costs divided by gross margin per unit
Payback Period: Period when enough product is sold to recoup the investment amount
Rate of Change: (New figure - Old figure) / Old figure

Additional Concepts

Assets: Current assets can be turned into cash within a year, while non-current assets take longer. Goodwill includes items like trademarks and copyrights.
Liabilities: Current liabilities are due within a year, while long-term liabilities are due over a longer period.
Owners' Equity: Stockholders' equity and retained earnings make up owners' equity; represents the owners' investment in the business. Retained earnings are profits not distributed as dividends.

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Description

Test your knowledge on key accounting concepts, including revenue, costs, and profitability. This quiz covers the three forms of accounting and the interpretation of financial statements such as cash flow, income statement, and balance sheet. Brush up on financial ratios and differentiate between types of expenses and liabilities.