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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Financial Analysis | 45–50% | - Purpose and components of financial statements
|
| Topic 2: Budgeting and Decision Making | 10–15% | - Relevant information for decision making
|
| Topic 3: Profit Planning | 10–15% | - Cost-volume-profit (CVP) analysis
|
| Topic 4: Cost Systems | 20–25% | - Costing methods
|
| Topic 5: Controls and Regulations | 10–15% | - Internal control systems and principles
|
>> Official Accounting-for-Decision-Makers Study Guide <<
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NEW QUESTION # 22
What does it mean if a company has a debt ratio of 101.5%?
Answer: A
NEW QUESTION # 23
Which current asset on a balance sheet appears first in the traditional category order for U.S.-based companies?
Answer: D
Explanation:
The correct answer is A. Cash . In the traditional ordering of current assets on a U.S. balance sheet, accounts are typically listed in order of liquidity , meaning how quickly they can be converted into cash or used. Cash is already the most liquid asset, so it normally appears first. After cash, companies usually list items such as marketable securities, accounts receivable, inventory, and prepaid expenses. OpenStax identifies cash among the standard examples of assets and discusses current assets such as accounts receivable, inventory, and prepaid items.
Option B, inventory , is incorrect because inventory is less liquid than cash and receivables. Option C, accounts receivable , is also incorrect because receivables are expected to become cash, but they are not cash itself. Option D, prepaid expenses , typically appear later because they do not convert into cash; instead, they provide future benefits through services or coverage already paid for. In U.S. practice, the standard presentation begins with the most liquid current asset, which is cash. Therefore, among the choices provided, Cash is the correct answer.
NEW QUESTION # 24
Which two details can management determine through a cost-volume-profit analysis?
Choose 2 answers.
Answer: A,C
Explanation:
The correct answers are A and B . Cost-volume-profit (CVP) analysis is a forward-looking planning tool used to study how changes in costs , sales volume , and selling price affect contribution margin, break-even point, and target profit. OpenStax describes CVP analysis as one of the most useful tools in managerial accounting for analyzing how changing business situations affect profit.
Option A is correct because CVP helps management estimate how a future change in variable costs or fixed costs would influence profit. Option B is also correct because CVP can determine how many units must be sold to achieve a desired target income or profit level. In contrast, Options C and D focus on past transactions and past tax costs, which are not the primary purpose of CVP analysis. CVP is mainly a planning and decision-making method rather than a historical reporting tool. It helps managers ask "what happens if" questions about future operations, such as what sales volume is needed to earn a target profit or how a change in cost structure would affect margins. Therefore, the correct choices are A and B .
NEW QUESTION # 25
During the year, a company purchased goods on a credit basis for its supplies of $750.
What would be the impact on the accounting equation and financial statement?
Answer: C
Explanation:
The correct answer is C. Increase in assets by $750 and increase in liability by $750 . When a company purchases supplies on credit, it receives an asset now and promises to pay later. The supplies increase the company's assets , and the amount owed to the seller increases liabilities , usually as accounts payable. This keeps the accounting equation balanced:
Assets = Liabilities + Equity
Here, assets rise by $750 and liabilities also rise by $750 , while equity is unchanged at the time of purchase.
OpenStax explains that buying items on account increases the related asset and increases accounts payable.
Option A is incorrect because liabilities do not decrease. Option B is incorrect because assets do not decrease when the company receives supplies. Option D is incorrect because neither side decreases at the moment of purchase. The expense is not recognized immediately unless the supplies are consumed; initially, the company records the asset and the obligation. This is a common transaction used to show how dual effects maintain balance in the accounting equation. Therefore, the correct impact is an increase in assets and an equal increase in liabilities , which is Option C .
NEW QUESTION # 26
The following list provides partial financial information for a company.
Current assets = $36,543
Total assets = $58,719
Current liabilities = $24,824
Total liabilities = $48,561
Stockholders' equity = $10,158
Sales = $46,997
Net income = $3,761
Market value of equity = $41,316
What is the current ratio for this company?
Answer: D
Explanation:
The correct answer is C. 1.47 . The current ratio measures a company's ability to pay its short-term obligations using its short-term assets. The formula is:
Current ratio = Current assets / Current liabilities
Using the given figures:
Current ratio = 36,543 / 24,824 = 1.4721 , which rounds to 1.47
This means the company has $1.47 of current assets for every $1.00 of current liabilities . In financial analysis, this is generally viewed as a sign that the company has a reasonable short-term liquidity position, although the ideal ratio depends on the industry and the quality of the current assets. For example, cash and receivables are usually more liquid than inventory.
Option A is close, but it is not the correct rounded result. Option B is incorrect because it would indicate current liabilities exceed current assets. Option D is far too high based on the numbers given. Since the question asks specifically for the current ratio , the correct calculation and answer are clearly 1.47 , making Option C the right choice.
NEW QUESTION # 27
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