Test Bank For Financial Accounting for MBAs, 8th Edition by Easton
Module 1: Financial Accounting for MBAs
True/False
Topic: Users of Financial Statement Information
LO: 2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
demand information primarily to assess cash flows to repay loan interest and principal.
Answer: True
Rationale: While both shareholders and bankers are interested in all the information companies provide,
shareholders care about more about a company’s profitability and bankers care more about solvency
and creditworthiness.
Topic: Publicly Available Financial Reports
LO: 2
2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
Answer: False
Rationale: Companies provide electronic versions of quarterly financial statements to the SEC, which
posts them to the Internet for the public to access them.
Topic: Users of Financial Statement Information
LO: 2
3. Publicly traded companies provide financial information primarily to satisfy the SEC and the tax
authorities (that is, the Internal Revenue Service).
Answer: False
Rationale: Demand for information extends to many users; the regulators such as the SEC and the IRS
are only one class of users.
Topic: SEC Filings
LO: 2
4. Publicly traded companies must provide to the Securities Exchange Commission annual audited financial
statements (10-K reports) and quarterly audited financial statements (10-Q reports).
Answer: False
Rationale: Quarterly reports do not need to be audited.
Topic: Balance Sheet
LO: 3
5. If a company reports retained earnings of $175.3 million on its balance sheet, it must also report $175.3
million in cash.
Answer: False