61. The _____ account accumulates the amounts of the undistributed earnings over time.
A. Treasury Stock
B. Cash
C. Additional Paid-in-Capital
D. Retained Earnings
E. Common Stock
62. When a firm has accumulated losses, rather than profits, the Retained Earnings account is typically called:
A. Negative cash balance
B. Ordinary Loss
C. Accumulated Excess
D. Accumulated Deficit
E. Insolvency
63. Retained earnings are
A. a source of financing for assets.
B. cash.
C. other non-cash assets.
D. the sum of a firm’s dividend declarations.
E. the source of net assets generated by the earnings process.
64. Retained earnings represent the source of net assets generated by the earnings process that exceed the firm’s dividend declarations. Common practice refers to the process of curtailing dividends to accumulate assets, represented by retained earnings, as _____.
A. operating activities
B. investing activities
C. external financing
D. internal financing
E. dividend seizure
65. Firms use short-term financing for
A. assets they expect to convert to cash in the short run.
B. assets to be used over long periods.
C. liabilities they expect to convert to cash in the short run.
D. liabilities to be used over long periods.
E. shareholders’ equity they expect to convert to cash in the short run.
66. Firms use long-term financing for
A. assets they expect to convert to cash in the short run.
B. assets to be used over long periods.
C. liabilities they expect to convert to cash in the short run.
D. liabilities to be used over long periods.
E. shareholders’ equity they expect to convert to cash in the short run.
67. Long-term debt imposes financing risk because it
A. decreases the need for shareholders’ equity.
B. requires principal and interest payments.
C. requires a default before filing for bankruptcy.
D. can result in default, creditor or regulatory intervention in the management of the firm.
E. None of these answer choices is correct.
68. The more variable the firm’s cash flows from operating activities, the more risk that the firm will not have sufficient cash to meet the required payments. Failure to meet these obligations can result in
A. default.
B. creditor intervention in the management of the firm.
C. regulatory intervention in the management of the firm.
D. bankruptcy.
E. All of these answer choices are correct.
69. Which of the following is/are true regarding the balance sheet?
A. The balance sheet does not provide all the information an analyst wants or needs about a firm’s resources and the claims on those resources.
B. Authoritative accounting guidance precludes the recognition of some resources on the balance sheet as assets and some obligations as liabilities
C. Amounts reported on the balance sheet for assets, liabilities, and shareholders’ equity do not necessarily reflect current market conditions.
D. Astute analysts recognize the features of the balance sheet and adjust the reported numbers.
E. All of these answer choices are correct.
70. Key factors in preparing a balance sheet is/are deciding
A. whether items meet the definitions for assets and liabilities.
B. whether items meet the recognition criteria for assets and liabilities.
C. how to measure the items.
D. Answers a, b, and c are correct.
E. None of these answer choices is correct.
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