Chapter 14 Accounting and Financial Statements Quiz 1

1. Only businesses use accounting information to demonstrate how their funds are being used. 
Select one: True False II 
The correct answer is 'False'. 
2. Bookkeeping is only one aspect of accounting and involves the recording of routine, day-to-day business transactions. 
Select one: True ../ 
False 
The correct answer is 'True'. 
3. Budgets are valuable tools because they break down cash inflows and outflows to help individuals and organizations clearly see where financial problems may lie. 
Select one: True ../ False 
The correct answer is 'True'. 
4. Net income is the profit (or sometimes loss) after all expenses, excluding taxes, have been deducted from revenue. 
Select one: True 
False •/ 
The correct answer is 'False'. 
5. Balance sheets show revenues, expenses, and profits. 
Select one: True False V 
The correct answer is 'False'. 
6. Owners' equity includes owners' contributions to their business along with income retained to finance growth and development. 
Select one: True ../ False 
The correct answer is 'True'. 
7. Negative cash flow always indicates that a company is in financial trouble. 
Select one: True False s 
The correct answer is 'False'. 
8. After ratios are computed, it is not much help to compare them with those of similar organizations. 
Select one: True False V 
The correct answer is 'False'. 
9. Liquidity ratios show how fast a company can turn current assets into cash to pay off short-term debt. 
Select one: True ../ False 
The correct answer is 'True'. 
10. Debt utilization ratios measure how much debt a company is using relative to other sources of capital. 
Select one: True ../ 
False 
The correct answer is 'True'.