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Question 1 of 10
1. Question
Which of the following is not a major part of a financial statement?
I. The income statement
II. The balance sheet
III. The price index statement
IV. The statement of cash flowsCorrect
There are three main parts to a financial statement. They are the income statement, the balance sheet, and the statement of cash flows.
Incorrect
There are three main parts to a financial statement. They are the income statement, the balance sheet, and the statement of cash flows.
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Question 2 of 10
2. Question
Which of the following is/are incorrect?
I. The statement of cash flows is also known as the profit and loss statement.
II. The income statement reports income received during a specified time period versus expenses accounted to that income.
III. The income statement is the financial statement that records the income and outlay of a company’s cash.
IV. The balance sheet can be summarized with the following equation: assets = liabilities + owners’ equity.Correct
The income statement, or profit and loss statement, reports income received during a specified time period versus expenses accounted to that income.
The balance sheet is a summated report of a company’s assets, liabilities, and
owners’ equity (or shareholders’ equity). It can be summarized with the following equation: assets = liabilities + owners’ equity.
The statement of cash flows is the financial statement that records the income and outlay of a company’s cash.Incorrect
The income statement, or profit and loss statement, reports income received during a specified time period versus expenses accounted to that income.
The balance sheet is a summated report of a company’s assets, liabilities, and
owners’ equity (or shareholders’ equity). It can be summarized with the following equation: assets = liabilities + owners’ equity.
The statement of cash flows is the financial statement that records the income and outlay of a company’s cash. -
Question 3 of 10
3. Question
When auditors investigate the reliability of financial statements, they will disclose an opinion on them; these opinions can be any of the following except:
I. Unqualified opinion
II. Adverse opinion
III. Qualified opinion
IV. Candid opinionCorrect
When auditors investigate the truth and reliability of financial statements, they will disclose an opinion on them. The best opinion to be offered is an unqualified (or unmodified) opinion, where the auditor states that in his professional judgment without qualification (or modification), the financial statements represent reality and conform to GAAP. There can also be qualified (or modified) opinions, where the auditor provides a significant but relatively minor qualification to the financial statements’ accuracy or reliability, or an adverse opinion, where he discloses a more material error in the financial statements.
Incorrect
When auditors investigate the truth and reliability of financial statements, they will disclose an opinion on them. The best opinion to be offered is an unqualified (or unmodified) opinion, where the auditor states that in his professional judgment without qualification (or modification), the financial statements represent reality and conform to GAAP. There can also be qualified (or modified) opinions, where the auditor provides a significant but relatively minor qualification to the financial statements’ accuracy or reliability, or an adverse opinion, where he discloses a more material error in the financial statements.
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Question 4 of 10
4. Question
Concerning the bases of financial accounting, which of the following is incorrect?
I. There are two broad bases of financial accounting.
II. Accrual basis accounting is not a type.
III. Cash basis accounting reports events and transactions only when revenues are earned and expenses incurred.
IV. Economic based accounting is a type.Correct
Financial accounting can broadly be distinguished into two forms, cash-basis accounting and accrual-basis accounting. Cash-basis accounting is quite commonsense, as it reports events and transactions only when cash is actually disbursed or received by an entity. This stands opposed to accrual-basis accounting, where events and transactions are reported only when revenues are earned and expenses incurred.
Incorrect
Financial accounting can broadly be distinguished into two forms, cash-basis accounting and accrual-basis accounting. Cash-basis accounting is quite commonsense, as it reports events and transactions only when cash is actually disbursed or received by an entity. This stands opposed to accrual-basis accounting, where events and transactions are reported only when revenues are earned and expenses incurred.
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Question 5 of 10
5. Question
Which of the following is not true about financial ratios?
I. They are a comparison of two specific numbers taken from financial statements.
II. Current ratio is a type.
III. They provide very broad and precise information.
IV. They provide investors with quick information to help make an informed decision.Correct
Financial ratios are a comparison of two specific numbers taken from financial statements. They provide the investor with quick information to help make an informed decision, but the information they provide is very broad and not entirely precise.
Incorrect
Financial ratios are a comparison of two specific numbers taken from financial statements. They provide the investor with quick information to help make an informed decision, but the information they provide is very broad and not entirely precise.
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Question 6 of 10
6. Question
How many stages does the business cycle have?
I. Four
II. Six
III. Five
IV. ThreeCorrect
The business cycle has four stages.
Incorrect
The business cycle has four stages.
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Question 7 of 10
7. Question
Which of the following best describes inflation risk?
Correct
Inflation risk describes the risk that an investor’s investments’ return will not keep pace with inflation and that he will ultimately lose purchasing power because of it.
Incorrect
Inflation risk describes the risk that an investor’s investments’ return will not keep pace with inflation and that he will ultimately lose purchasing power because of it.
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Question 8 of 10
8. Question
What is the price/earnings of a company if the share price is $50; 12-month earning is $20,000; and outstanding shares is $10,000.
Correct
P/E = price per share / earnings per share
= 50/(20,000/10,000)
= $25
Incorrect
P/E = price per share / earnings per share
= 50/(20,000/10,000)
= $25
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Question 9 of 10
9. Question
What is the price to book of a company if the share price is $50; 12-month earning is $20,000; outstanding shares is $10,000; and book value $400,000.
Correct
Price/book = price per share / book value
= 50/(400,000/10,000)
= $1.25
Incorrect
Price/book = price per share / book value
= 50/(400,000/10,000)
= $1.25
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Question 10 of 10
10. Question
Which of the following is true about the blue sky laws.
Correct
The Uniform Securities Act is a legislative attempt to bring uniformity to state securities laws that are widely varied, also known as blue-sky laws.
Incorrect
The Uniform Securities Act is a legislative attempt to bring uniformity to state securities laws that are widely varied, also known as blue-sky laws.