Study Guide and Quiz Answers

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1
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If your company uses accrual basis accounting, what do you need to pay special attention to?

A
Money the company owes
B
Money that is owed to the company
C
Cash flow
D
Revenue
2
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What is the opportunity cost of an investment?

A
The combined values of the other opportunities available
B
The value of the next most valuable opportunity
C
The marginal benefit of the investment
D
The volatility of the investment
3

Which of the following statements describes GAAP?

A
GAAP standards are written and regulated by the government.
B
It is legally required that all companies meet GAAP standards.
C
Companies that meet GAAP standards usually use cash basis accounting.
D
GAAP recommends accrual basis accounting.
4

Which of the following assets is the most liquid?

A
Inventory
B
Real estate
C
Money in the bank
D
A piece of equipment
5

Which of the following is a type of liability?

A
A revenue stream
B
A liquid asset
C
Accounts payable
D
Accounts receivable
6

If you wanted to make sure a company has enough money available to pay its bills, which financial statement would be most helpful?

A
Balance sheet
B
Income statement
C
Statement of owners' equity
D
Cash flow statement
7

In the accounting equation, assets are equal to which two things?

A
Debits + equity
B
Debits + accounts
C
Liabilities + equity
D
Liabilities + accounts
8

If you want to know whether a company had a profit or a loss during a specific period of time, which financial statement would be most helpful?

A
Statement of owners' equity
B
Cash flow statement
C
Balance sheet
D
Income statement
9

Money that your company has in the bank in case of unexpected financial needs or in case sales slow down is called ____________.

A
An asset fund
B
A cash reserve
C
Equity
D
Insurance
10

Which type of risk is most likely to be insurable?

A
Pure risk
B
Speculative risk
C
Equity risk
D
Investment risk

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