foundations of accounting


Question Description:

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Total: 100 Points Possible Number of Points: Total Scored: Part I: True /False (15 Points) 1. An extraordinary item appears on the income statement before the section on discontinued operations. True False 2. Earnings per share is equal to net income applicable to common stock, divided by the weighted number of common shares outstanding. True False 3. The price earnings ratio is based on expected future earnings, while the earnings per share ratio is based on historical earnings. True False 4. In order to receive a dividend, a stockholder must have owned the stock as of the declaration date. Document Preview: Total: 100 Points Possible Number of Points: Total Scored: Part I: True /False (15 Points) 1. An extraordinary item appears on the income statement before the section on discontinued operations. True False 2. Earnings per share is equal to net income applicable to common stock, divided by the weighted number of common shares outstanding. True False 3. The price earnings ratio is based on expected future earnings, while the earnings per share ratio is based on historical earnings. True False 4. In order to receive a dividend, a stockholder must have owned the stock as of the declaration date. True False 5. A stock dividend provides a stockholder with more shares of stock, but his or her percentage of ownership in the company is no larger than before. True False 6. The principal purpose of a statement of cash flows is to measure the profitability of a business that maintains its accounting records on the cash basis. True False 7. In a statement of cash flows, the term cash includes both cash and cash equivalents. True False 8. Companies that show profits on the income statement will always show positive cash flows from operating activities. True False 9. The purchase of equipment for the manufacturing of inventory belongs in the operations section of the statement of cash flows. True False 10. In the long run, it is more important for a business to generate positive cash flows from investing activities than from operating activities. True False 11. The quick ratio is especially useful in evaluating the liquidity of a company with fast moving inventories. True False 12. The gross profit rate usually is lowest on fast moving merchandise and highest on specialty and novelty products. True False 13. The trend in ratios is usually more useful than looking at a single year’s ratio. True False 14. A company’s liquidity refers to its ability to remain profitable. True False 15. The lower the current ratio, the more liquid the company appears. True False II. Multiple Choice… Attachments: MGMT-553-Exam….pdf

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