Accounting for Managers Exam Preparation Guide
Course Introduction
Accounting for Managers is designed to provide future business leaders with a comprehensive understanding of accounting concepts, principles, and practices as they relate to managerial decision-making. The course emphasizes the interpretation and application of financial and managerial accounting information to plan, control, and evaluate business operations. Topics include financial statement analysis, budgeting, cost-volume-profit analysis, and performance measurement. Through real-world case studies and practical exercises, students will learn how to use accounting data to support strategic decisions, manage resources efficiently, and communicate financial results effectively within an organizational context.
Recommended Textbook
Financial Statement Analysis 13th Edition by Charles
H. Gibson
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Chapter 1: Introduction to Financial Reporting
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Sample Questions
Q1) The assumption that deals with when to recognize the costs that are associated with the revenue that is being recognized is:
A)matching.
B)going concern.
C)consistency.
D)materiality.
E)None of the answers are correct.
Answer: A
Q2) Some industry practices lead to accounting reports that do not conform to the general theory that underlies accounting.
A)True
B)False
Answer: True
Q3) To the extent that money does not remain stable,it loses its usefulness as the standard for measuring financial transactions.
A)True
B)False
Answer: True
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3
Chapter 2: Introduction to Financial Statements and Other Financial Reporting Topics
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Q1) This opinion states that the financial statements present fairly,in all material respects,the financial position,results of operations,and cash flows of the entity in conformity with generally accepted accounting principles.
A)adverse
B)unqualified
C)qualified
D)reviewed
E)disclaimer
F)compiled Answer: B
Q2) When a subsidiary is not consolidated,it is accounted for as an investment on the parent's balance sheet.
A)True
B)False Answer: True
Q3) The accountant's report expresses an opinion on reviewed financial statements.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Balance Sheet
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Sample Questions
Q1) When a firm repurchases its own stock and retires it,the stock is called treasury stock.
A)True
B)False Answer: False
Q2) Which of the following is not a current asset?
A)Marketable securities
B)Material inventory
C)Unearned rent income
D)Prepaid interest
E)Accrued insurance Answer: C
Q3) The balance sheet is presented with the assets equal to liabilities plus equity.When this presentation is presented side by side,it is called the account form.
A)True
B)False Answer: True
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Chapter 4: Income Statement
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Sample Questions
Q1) If a firm consolidates subsidiaries that are not wholly owned,an income statement item is created that is termed:
A)dividend income.
B)minority share of earnings.
C)equity income.
D)extraordinary.
E)gain from sale of subsidiary.
Q2) Which of the following will not affect retained earnings?
A)Declaration of a stock dividend
B)Payment of a cash dividend previously disclosed
C)Adjustment for an error of a prior period
D)Net income
E)Net loss
Q3) A stock split merely increases the number of shares of stock;it usually does not change retained earnings or paid-in capital.
A)True
B)False
Q4) Extraordinary items are always presented gross of applicable income taxes.
A)True
B)False
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Chapter 5: Basics of Analysis
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Sample Questions
Q1) Liquidity ratios can be used:
A)to measure the degree of protection of long-term suppliers of funds.
B)to measure borrowing capacity.
C)to measure the earning ability of a firm.
D)to measure the firm's ability to meet its current obligations.
E)to measure the worth of the firm.
Q2) In financial statement analysis,ratios are:
A)the only type of analysis where industry data are available.
B)absolute numbers converted to a common base.
C)fractions usually expressed in percent or times.
D)the only indication of the financial position of the firm.
E)None of the answers are correct.
Q3) A service firm will usually have a low amount of inventory,consisting primarily of supplies.
A)True
B)False
Q4) Absolute figures usually have more meaning than ratio comparisons.
A)True
B)False
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Chapter 6: Liquidity of Short-Term Assets;related
Debt-Paying Ability
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Q1) Company A uses LIFO and Company B uses FIFO for inventory valuation.Otherwise,the firms are of similar size and have the same revenue and expense.Assume inflation.In analyzing liquidity and profitability of the two firms,which of the following will hold true?
A)It is impossible to compare two firms with different inventory methods.
B)Company B will have relatively higher profit and higher inventory turnover.
C)Company B will have relatively higher profit and lower inventory turnover.
D)Company A will have a higher current ratio and acid test ratio,with the same profit.
E)Company B will have relatively higher profit and a higher current ratio.
Q2) The ability of an entity to maintain its short-term,debt-paying ability is important to all users of financial statements.
A)True
B)False
Q3) Current assets are assets that (1)are in the form of cash, (2)will be realized in cash,or (3)conserve the use of cash within the operating cycle of a business or for one year,whichever is shorter.
A)True
B)False
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Chapter 7: Long-Term Debt-Paying Ability
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Sample Questions
Q1) Aristocrats Art reported the following trend analysis to its bank as an attachment to a loan application. \(\begin{array}{lll} &\underline{2012}&\underline{2011}&\underline{2010}\\
\text {Fixed Charge Ratio}&4.00 & 2.50 & 1.54 \\
\text {Times Interest Earned Ratio}&4.94 & 3.17 & 2.08 \\
\text {Debt Ratio}&0.47 & 0.51 & 0.56 \\
\text {Debt to Tangible Net Worth Ratio}&0.91 & 1.06 & 1.36 \end{array}\)
You have been asked to evaluate the long-term borrowing capacity.You know that a rule of thumb for this industry for the debt/ equity ratio is 1 to 1.
Required:
a.Compute the debt/equity ratio for 2012,2011,and 2010,using the debt ratio as a guide.
b.Comment on the long-term borrowing ability of this firm.
Q2) Increases of profits by cutting the cost of sales would increase the times interest earned.
A)True B)False
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Chapter 8: Profitability
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Sample Questions
Q1) Net profit margin measures return on:
A)sales.
B)owners' equity.
C)productive assets.
D)total assets.
E)inventory.
Q2) Sales to fixed assets will have the least meaning if assets are relatively new.
A)True
B)False
Q3) Which of the following ratios will usually have the lowest percent?
A)Return on investment
B)Return on total equity
C)Return on common equity
D)Return on total assets
E)There is not enough information to tell
Q4) Interim reporting recognizes that timeliness of data offsets lack of detail and requires only minimum data.
A)True
B)False
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Chapter 9: For the Investor
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Q1) Stock options do not require a cash outlay from the company,while stock appreciation rights often do require a cash outlay.
A)True
B)False
Q2) A firm might have a low dividend payout ratio if it were planning a major expansion.
A)True
B)False
Q3) In computing earnings per share,preferred dividends are subtracted from net income.
A)True
B)False
Q4) Book value per share measures the current value of the net assets on a per share basis.
A)True
B)False
Q5) Total earnings from securities include both dividends and price appreciation.
A)True B)False
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Chapter 10: Statement of Cash Flows
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Q1) The conversion of long-term bonds into common stock is an example of a transaction involving two financing activities with no cash flow effect.
A)True
B)False
Q2) Which of the following is not a purpose of the statement of cash flows?
A)To show cash flow from operations
B)To show cash flow from financing activities
C)To show cash flow from investing activities
D)To show all investing and financing transactions
E)To show operating expenses for a period of time
Q3) Sale of equipment for cash is an operating activity.
A)True
B)False
Q4) Purchase of treasury stock
A)Operating
B)Investing
C)Financing
D)Item would not appear
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Chapter 11: Expanded Analysis
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Sample Questions
Q1) Profitability ratios are the most likely ratios to be selected for corporate objectives.
A)True
B)False
Q2) The authors (Tom Copeland,Tim Keller,and Jack Morrin)maintain that the correct way to value dot.coms is by using the classic discounted-cash-flow (DCF)approach to valuating,reinforcing the continued importance of basic economics and finance.
A)True
B)False
Q3) Accounting policies that result in the fastest reporting of income are the most conservative.
A)True
B)False
Q4) Analytical review procedures may be performed at various times within the audit.
A)True
B)False
Q5) Visually,a pie graph can mislead because of an illusion.
A)True
B)False
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Sample Questions
Q1) Insurance companies tend to have a stock market price at a discount to the average market price (price/earnings ratio).Which of the following is not a likely reason for this relatively low market value?
A)Insurance is a highly regulated industry.
B)The insurance industry has substantial competition.
C)The accounting environment likely contributes to the relatively low market price for insurance company stocks.
D)The nature of the industry leads to standards that provide for much judgment and possible manipulation of reported profit.
E)Insurance companies typically have a high return on common equity.
Q2) In the case of air carriers,the cost of goods sold section of the income statement looks similar to that of a steel manufacturer.
A)True
B)False
Q3) For a bank,loans to customers are assets.
A)True
B)False
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Chapter 13: Personal Financial Statements and Accounting
for Governments and Not-For-Profit Organizations
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Q1) Government-wide financial statements help users do all but which of the following?
A)Relate cash receipts and disbursements to the acquisition of long-lived assets.
B)Assess the finances of the government in its entirety,including the year's operating results.
C)Determine whether the government's overall financial position improved or deteriorated.
D)Evaluate whether the government's current-year revenues were sufficient to pay for current-year services.
E)Make better comparisons between governments.
Q2) Under governmental accounting,a fund is defined as a fiscal and accounting entity with a self-balancing set of accounts.
A)True
B)False
Q3) Some government and not-for-profit organizations have added budgeting by objectives and/or measures of productivity to their financial reporting.
A)True
B)False
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