Study Guide Quiz 1

Part 1 of 1 - Week 1 Quiz 100.0 Points

Question 1 of 25 4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its

A.capital structure. B.earnings volatility. C.sales, profit margins, and earnings. D.all of these.

Answer Key: D

Question 2 of 25 4.0 Points
The primary disadvantage of accrual accounting is that

A.it does not match revenues and expenses in the period in which they are incurred. B.it does not appropriately measure accounting profit. C.it does not recognize accounts receivable. D.it does not adequately show the actual cash flow position of the firm.

Answer Key: D

Question 3 of 25 4.0 Points
Total assets of a firm are financed with liabilities and stockholders' equity.

True False

Answer Key: True

Question 4 of 25 4.0 Points
Gross profit is equal to

A.sales minus cost of goods sold. B.sales minus (selling and administrative expenses). C.sales minus (cost of goods sold and selling and administrative expenses). D.sales minus (cost of goods sold and depreciation expense).

Answer Key: A

Question 5 of 25 4.0 Points
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.

A. True B. False

Answer Key: False

Question 6 of 25 4.0 Points
Ratios are used to compare different firms in the same industry.

A. True B. False

Answer Key: True

Question 7 of 25 4.0 Points
The Sarbanes-Oxley Act was passed in an effort to

A.protect small business from large corporations dominating the market. B.ensure that partnerships divide profits among partners in a fair manner. C.guarantee outside auditors can control corporate accounting practices. D.control corrupt corporate behavior.

Answer Key: D

Question 8 of 25 4.0 Points
Which of the following is not subtracted out in arriving at operating income?

A.interest expense B.cost of goods