Financial Accounting Components Quiz

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What are the additional expenses that can be incurred by protecting and insuring inventory?

Insurance and Security Costs

In which industries is there a higher risk of inventory becoming obsolete?

Industries with rapidly changing technology or consumer preferences

What happens if a company has to write off or discount obsolete inventory?

It can result in losses

What is the opportunity cost associated with holding too much inventory?

Missed opportunities Signup and view all the answers

How does excessive inventory tie up capital that could be used for other purposes?

Holding excessive inventory ties up capital that could be deployed more efficiently elsewhere Signup and view all the answers

What challenges may a company face if a significant portion of its resources is tied up in inventory?

Cash flow challenges Signup and view all the answers

What are some of the additional costs that may be incurred the longer inventory is held?

Deterioration, spoilage, or damage Signup and view all the answers

Why is having too much inventory not good for a company?

Too many inventories are not good for the company Signup and view all the answers

What can happen if a company invests heavily in maintaining high levels of inventory?

It might miss out on investing in research and development, marketing, or other growth areas Signup and view all the answers

What is the capital used for excess inventory that could be used for other purposes?

Capital that could be used for other purposes Signup and view all the answers

What are the advantages of Corporate Governance according to the text?

<ol> <li>It creates transparent controls and rules, guides leadership, and aligns the interest of employees, management, directors, and shareholders. 2. It builds trust with public officials, community, and investors. 3. It promotes long-term returns, financial viability, and opportunities. 4. It facilitates the raising of capital. 5. Good Corporate governance can lead to rising prices. 6. It is a game plan for long-term success.</li> </ol> Signup and view all the answers

What are the two types of Corporate Governance models mentioned in the text?

<ol> <li>One Tier Model. 2. Two Tier Model.</li> </ol> Signup and view all the answers

Which countries typically adopt the One Tier board structure in Corporate Governance?

UK, Australia, US, South Africa, India Signup and view all the answers

What is the purpose of the Materiality Principle in accounting?

To disclose only relevant matters in the financial statements for decision-making. Signup and view all the answers

Explain the Prudence Principle in accounting.

It ensures the reliability of financial statements by avoiding overstatement. Signup and view all the answers

Define the Principal Agent Conflict in the context of accounting.

It involves conflicts between investors (principals) and managers (agents) regarding decision-making. Signup and view all the answers

How does the Size of the item or transaction impact the Materiality of Financial Statements?

It influences whether the item should be disclosed based on its significance relative to revenue or profit. Signup and view all the answers

How can offering share options or some share in the company help reduce the Principal-Agent conflict?

By aligning the interests of agents with that of the principal. Signup and view all the answers

What role does Long Term Relationships play in reducing conflict between principals and agents?

Building long-term relationships can lead to more collaborative and less conflict-prone activities. Signup and view all the answers

How does regular monitoring and audits contribute to reducing the Principal-Agent conflict?

Regular audits ensure compliance with agreed terms and discourage opportunistic behavior. Signup and view all the answers