FAC Finance and Accounting Reporting & Analysis 2

Question 1

Under ASC 230, which of the following is classified as a financing activity on the statement of cash flows?

Accepted Answer

Payment of dividends to shareholders

Answer

Purchase of equipment

Answer

Collection of accounts receivable

Answer

Payment of interest expense

Question 2

A company reports a current ratio of 0.8. Which of the following best describes this situation?

Accepted Answer

The company has more current liabilities than current assets

Answer

The company is highly profitable

Answer

The company has strong liquidity

Answer

The company's long-term debt exceeds equity

Question 3

Which financial statement metric is used to assess how efficiently a company collects its receivables?

Accepted Answer

Days Sales Outstanding (DSO)

Answer

Gross profit margin

Answer

Debt-to-equity ratio

Answer

Operating leverage

Question 4

Under GAAP, when should a contingent liability be recorded on the balance sheet?

Accepted Answer

When it is probable and the amount can be reasonably estimated

Answer

When it is reasonably possible only

Answer

When it is remote but significant

Answer

Only after the lawsuit is settled

Question 5

Which of the following best describes the purpose of horizontal analysis in financial reporting?

Accepted Answer

Comparing financial data across time periods to identify trends

Answer

Comparing a company's ratios to industry benchmarks

Answer

Expressing each line item as a percentage of a base figure in the same period

Answer

Analyzing the structure of the balance sheet

Question 6

A company using FIFO inventory costing during a period of rising prices will report:

Accepted Answer

Higher net income and higher ending inventory than LIFO

Answer

Lower net income and lower ending inventory than LIFO

Answer

The same net income as LIFO

Answer

Lower gross profit than LIFO

Question 7

Which of the following is NOT typically included in operating expenses on an income statement?

Accepted Answer

Interest expense on long-term debt

Answer

Selling, general, and administrative expenses

Answer

Depreciation and amortization

Answer

Research and development costs