MBA Accounting 2

Question 1

A company's current ratio is calculated as:

Accepted Answer

Current Assets / Current Liabilities

Answer

Total Assets / Total Liabilities

Answer

Net Income / Total Assets

Answer

Total Revenue / Current Liabilities

Question 2

Which of the following best describes accrual-basis accounting?

Accepted Answer

Recognizing revenues when earned and expenses when incurred, regardless of cash flow

Answer

Recording transactions only when cash is received or paid

Answer

Reporting income only when customers pay in cash

Answer

Recording all transactions at their replacement cost

Question 3

The abbreviation EBITDA stands for:

Accepted Answer

Earnings Before Interest, Taxes, Depreciation, and Amortization

Answer

Equity Before Interest, Taxes, Depreciation, and Amortization

Answer

Earnings Before Income Tax, Dividends, and Accruals

Answer

Estimated Budget Including Taxes, Depreciation, and Amortization

Question 4

Which financial ratio measures how efficiently a company collects payments from its credit customers?

Accepted Answer

Accounts Receivable Turnover Ratio

Answer

Inventory Turnover Ratio

Answer

Return on Assets

Answer

Debt-to-Equity Ratio

Question 5

Goodwill appearing on a company's balance sheet represents:

Accepted Answer

The amount paid over the fair value of net identifiable assets in an acquisition

Answer

The appraised market value of the company's brand name

Answer

The total value of a company's patents and trademarks

Answer

Customer loyalty program liabilities

Question 6

The debt-to-equity ratio primarily measures:

Accepted Answer

The proportion of company financing coming from debt versus equity

Answer

A company's profitability relative to shareholder equity

Answer

The return generated on total invested capital

Answer

A company's ability to pay short-term obligations

Question 7

Which accounting assumption requires that financial statements be prepared on the basis that the business will continue to operate indefinitely?

Accepted Answer

Going Concern Assumption

Answer

Materiality Principle

Answer

Consistency Principle

Answer

Conservatism Principle