Skip to main content
Business LibreTexts

8.8: Practice Questions

  • Page ID
  • Multiple Choice


    LO 1.2Accounting is sometimes called the “language of _____.”

    1. Wall Street
    2. business
    3. Main Street
    4. financial statements

    LO 1.2Financial accounting information ________.

    1. should be incomplete in order to confuse competitors
    2. should be prepared differently by each company
    3. provides investors guarantees about the future
    4. summarizes what has already occurred

    LO 1.2External users of financial accounting information include all of the following except ________.

    1. lenders such as bankers
    2. governmental agencies such as the IRS
    3. employees of a business
    4. potential investors

    LO 1.2Which of the following groups would have access to managerial accounting information?

    1. bankers
    2. investors
    3. competitors of the business
    4. managers

    LO 1.2All of the following are examples of managerial accounting activities except ________.

    1. preparing external financial statements in compliance with GAAP
    2. deciding whether or not to use automation
    3. making equipment repair or replacement decisions
    4. deciding whether or not to use automation

    LO 1.3Which of the following is not true?

    1. Organizations share a common purpose or mission.
    2. Organizations have inflows and outflows of resources.
    3. Organizations add value to society.
    4. Organizations need accounting information.

    LO 1.3The primary purpose of what type of business is to serve a particular need in the community?

    1. for-profit
    2. not-for-profit
    3. manufacturing
    4. retail

    LO 1.3Which of the following is not an example of a retailer?

    1. electronics store
    2. grocery store
    3. car dealership
    4. computer manufacturer
    5. jewelry store

    LO 1.3A governmental agency can best be described by which of the following statements?

    1. has a primary purpose of making a profit
    2. has a primary purpose of using taxpayer funds to provide services
    3. produces goods for sale to the public
    4. has regular shareholder meetings

    LO 1.3Which of the following is likely not a type of not-for-profit entity?

    1. public library
    2. community foundation
    3. university
    4. local movie theater

    LO 1.4Which of the following is not considered a stakeholder of an organization?

    1. creditors
    2. lenders
    3. employees
    4. community residents
    5. a business in another industry

    LO 1.4Stockholders can best be defined as which of the following?

    1. investors who lend money to a business for a short period of time
    2. investors who lend money to a business for a long period of time
    3. investors who purchase an ownership in the business
    4. analysts who rate the financial performance of the business

    LO 1.4Which of the following sell stock on an organized stock exchange such as the New York Stock Exchange?

    1. publicly traded companies
    2. not-for-profit businesses
    3. governmental agencies
    4. privately held companies
    5. government-sponsored entities

    LO 1.4All of the following are sustainable methods businesses can use to raise capital (funding) except for ________.

    1. borrowing from lenders
    2. selling ownership shares
    3. profitable operations
    4. tax refunds

    LO 1.4The accounting information of a privately held company is generally available to all of the following except for________.

    1. governmental agencies
    2. investors
    3. creditors and lenders
    4. competitors

    LO 1.5Which of the following skills/attributes is not a primary skill for accountants to possess?

    1. written communication
    2. verbal communication
    3. ability to work independently
    4. analytical thinking
    5. extensive computer programing background

    LO 1.5Which of the following is typically required for entry-level positions in the accounting profession?

    1. bachelor’s degree
    2. master’s degree
    3. Certified Public Accountant (CPA)
    4. Certified Management Accountant (CMA)
    5. only a high school diploma

    LO 1.5Typical accounting tasks include all of the following tasks except ________.

    1. auditing
    2. recording and tracking costs
    3. tax compliance and planning
    4. consulting
    5. purchasing direct materials

    LO 1.5What type of organization primarily offers tax compliance, auditing, and consulting services?

    1. corporations
    2. public accounting firms
    3. governmental entities
    4. universities

    LO 1.5Most states require 150 semester hours of college credit for which professional certification?

    1. Certified Management Accountant (CMA)
    2. Certified Internal Auditor (CIA)
    3. Certified Public Accountant (CPA)
    4. Certified Financial Planner (CFP)



    LO 1.2Research your top five career choices. Identify financial factors that might influence your career choice. The following websites might be helpful in answering this question.


    LO 1.2Using the same top five career choices, identify nonfinancial factors that might influence your career choice. The following websites might be helpful in answering this question.


    LO 1.2Think about a recent purchase you made. Describe what financial and nonfinancial factors went into that purchase. Rank the factors, and explain how you made the final decision to purchase the item.


    LO 1.2Computerized accounting systems help businesses efficiently record and utilize financial information. QuickBooks is a popular software package for small businesses. Explore the QuickBooks website at Select one of the QuickBooks plans, and discuss some of the capabilities of the software. Taking the perspective of a small business owner, explain how this software might help the business.


    LO 1.2The following information was taken from the Netflix financial statements.

    Netflix, Inc., Consolidated Statement of Operations, For the Years, 2014, 2015, and 2016 Sales: December 31, 2014 $5,504,656*, December 31, 2015 $6,779,511, December 31, 2016 $8,830,669. *Dollar values are in thousand of U S dollars. Source: United States Security and Exchange Commission. “Netflix, Inc. Consolidated Statements of Operations.”

    For Netflix, sales is the product of the number of subscribers and the price charged for each subscription. What observations can you make about the previous three years of Netflix’s sales? Given this data, provide any predictions you can make about the future financial performance of Netflix. What nonfinancial factors influenced that prediction?


    LO 1.2The following chart shows the price of Netflix stock for the six-month period from August 2017 to January 2018.

    Chart with Dollars (in thousands) as the y axis and Date as the x axis. The line indicating the price of the stock August of 2017 starts at around 180 and fluctuates between 150 and 200 until January of 2018, when the price passes 200 in a sharp rise to nearly 300, then drops slightly at the end of the chart measurement. There are also lines on the chart indicating Volume (in millions) which fluctuate up and down throughout the time period, seemingly with no relation to the stock price line. Source: Nasdaq. “Netflix, Inc. Stock Chart.”

    Assume you are considering purchasing Netflix stock. What considerations would influence your decision? Relative to Netflix’s financial performance, what factors would influence the decision, and how would those factors rank in your decision? What about the nonfinancial factors?


    LO 1.3Use the internet to research one for-profit, one governmental, and one not-for-profit entity. For each entity, describe the following:

    1. the primary purpose of the entity
    2. the types of activities that accountants would record (hint: what is the source of the entity’s funding, and what costs might the entity have?)
    3. the types of decisions that might be made in this organization and how financial and nonfinancial information might help the decision-making process

    LO 1.3Use the internet to research one manufacturing, one retail (or merchandising), and one service business. For each business, describe the following:

    1. the primary purpose of the entity
    2. the types of activities that accountants would record (hint: what is the source of the business’ funding, and what costs might the business have?)
    3. the types of decisions that might be made in this organization and how financial and nonfinancial information might help the decision-making process

    LO 1.3Assume you are considering opening a retail business. You are trying to decide whether to have a traditional “brick-and-mortar” store or to sell only online. Explain how the activities and costs differ between these two retail arrangements.


    LO 1.3Uber and Lyft are two popular ride-sharing services. Imagine that you are visiting New York City for a family vacation. You are trying to decide whether to use one of these ride-sharing services to get around the city or rent a car and drive yourself. Considering the perspectives of the passengers (your family), the drivers, and the company (Uber or Lyft), explain the following:

    1. why ride-sharing services have gained in popularity
    2. the financial considerations relevant to your decision
    3. the nonfinancial considerations relevant to your decision

    LO 1.3How would you categorize or classify a company like Disney?


    LO 1.3Charity Navigator ( is a website dedicated to providing information regarding not-for-profit charitable organizations.

    1. After reviewing the website, explain how not-for-profit organizations are rated.
    2. Explain why there is a need for the type of information provided by Charity Navigator.
    3. Choose one to two charities listed in the website. Explain the information provided about the charity (financial and nonfinancial), the rating of the charity, and any other relevant factors.

    LO 1.4Use the internet to visit the Securities and Exchange Commission (SEC) website ( Write a report discussing the following:

    1. several of the services provided by the SEC
    2. why the services are important to the investing public
    3. why you think the SEC would require publicly traded companies to file financial information

    LO 1.4Imagine that you have just been elected president of your university’s student senate. Assume the university is considering constructing a new student union—a place that offers a variety of stores, restaurants, and entertainment option for students—and has asked the student senate to develop a formal position in support or opposition of the new student union.

    1. Identify the stakeholders involved in this decision. Discuss the relevant considerations that each stakeholder might have.
    2. Discuss the financial information that might be helpful in formulating the student senate position.
    3. Discuss the nonfinancial information that might be helpful in formulating the student senate position.

    LO 1.4According to a company press release, on January 5, 2012, Hansen Natural Corporation changed its name toMonster Beverage Corporation. According to Yahoo Finance, on that day the value of the company stock (symbol: MNST) was $15.64 per share. On January 5, 2018, the stock closed at $63.49 per share. This represents an increase of nearly 306%.

    1. Discuss the factors that might influence the increase in share price.
    2. Consider yourself as a potential shareholder. What factors would you consider when deciding whether or not to purchase shares in Monster Beverage Corporation today?

    LO 1.4The Dow Jones Industrial Average (DJIA) is often cited as a key metric for business activity. The average is a mathematical formula that uses the stock prices of thirty companies traded on the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation (NASDAQ) system.

    1. Identify several of the companies that are included in the DJIA.
    2. Explain why this metric might be commonly used to measure business activity.
    3. Research the history of the DJIA and note some interesting facts. When did the Dow begin? What was the first value? What was the lowest value? The following is an example of a website that may be helpful:
    4. What is the current value of the DJIA? What factors might contribute to the difference between early and current values of the DJIA?

    LO 1.5Many professional certifications now have requirements for ethics training.

    1. Define ethics.
    2. Why does the accounting profession put so much emphasis on acting ethically?

    LO 1.5The Certified Public Accountant (CPA) exam is a uniform exam that is administered by a national organization. Licenses, however, are issued by individual states.

    1. Explain why you think each state is responsible for issuing CPA licenses.
    2. Choose two to three states, and compare and contrast the requirements to become a CPA. Are they fairly consistent or drastically different from each other? A helpful resource is You may also find it helpful to search the board of accountancy for each state.
    3. Tax preparation is a large part of what many CPAs do. Students may be interested to know that a CPA (or any other licensing) is not required to prepare tax returns. Assume you know two friends who prepare tax returns for others, one is a CPA and one is not. Assume that both friends intend to move next year and will, therefore, prepare taxes in another state. Analyze this situation.

    LO 1.5Accounting is not the only profession to offer professional certifications. Many other professions have certifications that are either required or encouraged for entry or advancement in the profession. Think of two to three career paths that you have considered or are considering. After doing some research, complete the following:

    1. Identify the name of the certification and the institute that administered the certification.
    2. Explain the education and/or experience requirements for taking the exam and earning the license.
    3. Discuss any of the benefits, financial or otherwise, of earning the certification.

    LO 1.5Assume you are considering earning a master’s degree (or even doctorate) after earning your bachelor’s degree. One option is to continue directly into a master’s program and then enter the workforce. Another option is to gain some work experience and then return to graduate school and earn your master’s degree.

    1. Evaluate these options, and identify the advantages and disadvantages of each.
    2. It may be helpful to do some research on earnings and advancement potential, available formats of graduate programs (full time, part time, online), and other factors that might influence your decision. You may want to research graduate programs and utilize sites such as the Occupational Outlook Handbook (