Financial Accounting 9th Edition by Miller-Nobles Test bank

Answer: False
Difficulty: Moderate
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 4 Prepare financial statements
A-Head: How do you prepare financial statements?

63. The balance sheet shows whether or not a business is earning a profit.

1. True
2. False

Answer: False
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 4 Prepare financial statements
A-Head: How do you prepare financial statements?

64. The income statement shows whether or not a business can generate enough cash to pay its liabilities.

1. True
2. False

Answer: False
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 4 Prepare financial statements
A-Head: How do you prepare financial statements?

Multiple choice: Choose the alternative(s) that best completes the statement or answers the question.

65. If an analyst wants to know how likely it is that a company would be able to earn a profit, the MOST useful statement would be the:

1. statement of changes in equity.
2. balance sheet.
3. cash flow statement.
4. income statement.

Answer: D
Difficulty: Moderate
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 5 Use financial statements and return on assets (ROA) to evaluate business performance
A-Head: How do you use financial statements to evaluate business performance

66. You can evaluate business performance in terms of profitability by analysing which financial statement?

1. Income statement
2. Cash flow statement
3. Balance sheet
4. None of the above

Answer: A
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 5 Use financial statements and return on assets (ROA) to evaluate business performance
A-Head: How do you use financial statements to evaluate business performance

67. The explanation of why the profit differs from change in cash balance for the period is explained in which of the following statements?

1. Balance sheet
2. Income statement
3. Cash flow statement
4. Statement of changes in equity

Answer: C
Difficulty: Basic
AACSB: Analytical Thinking
Learning Objective: 5 Use financial statements and return on assets (ROA) to evaluate business performance
A-Head: How do you use financial statements to evaluate business performance

68. If an analyst wants to know how likely it is that a business would be able to pay off all its debts, which of the following statements would be MOST useful?

1. Cash flow statement
2. Income statement
3. Statement of changes in equity
4. Balance sheet

Answer: D
Difficulty: Moderate
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 5 Use financial statements and return on assets (ROA) to evaluate business performance
A-Head: How do you use financial statements to evaluate business performance

69. You can evaluate the economic resources, debt and overall financial position of a company in which of the following financial statements?

1. Cash flow statement
2. Statement of changes in equity
3. Income statement
4. Balance sheet

Answer: D
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 5 Use financial statements and return on assets (ROA) to evaluate business performance
A-Head: How do you use financial statements to evaluate business performance

70. The return on assets is calculated by:

1. multiplying profit and average assets.
2. dividing profit by average assets.
3. subtracting profit from average assets.
4. adding profit and average assets.