50 on and analysis volume corpore STUDY QUI 1.1. 1.2. 1.3. 1.4. CHAPTER 1 Financial Statements (c) Most recent goods sold first. (d) Oldest goods sold first. 9. What subject(s) should the management discussie discuss? (a) Liquidity. (b) Commitments for capital expenditures. ic) A breakdown of sales increases into price and volum (d) All of the above. 10. Which of the following statements is true? (a) Annual reports only contain glossy pictures. (b) Public relations material should be used cautiously. (c) Market data refers to the advertising budget of a firm (d) The shareholders' letter should be ignored. 11. What information can be found in a proxy statement? (a) Information on voting procedures. (b) Information on executive compensation. (c) Information on the breakdown of audit and nonaudit fees paid to the audit firm. (d) All of the above. 12. What does it mean by the matching principle in accounting? (a) Expenses are matched with the generation of revenues to determine net income for an accounting period. (b) Generation of revenues are matched with expenses to determine net income for the previous period. (c) Generation of revenues are matched with asset purchases to deter- mine the efficiency of asset usage. (d) Expenses are matched with asset purchases to determine the retum on investment. - 13. What is the accrual basis of accounting? (a) Recognition of revenue when it is received in cash. (b) Recognition of revenue in the accounting period when the sale is made rather than when cash is received (c) Matching expenses with revenue in the appropriate accounting period. (d) Both (b) and (c). 14. Which of the following are methods by which management can manip- ulate earnings and possibly lower the quality ulate earnings and possibly lower the quality of reported earnings? (a) Changing an accounting policy to increase eaming (b) Refusing to take a loss on inventory to take a loss on inventory in an accounting period when the inventory is known to be obsolete. (c) Decreasing discretionary expenses. (d) All of the above. - _ 15. Match each element with its financial statem (1) Expenses (2) Cash flow from operating activities. (3) Assets (4) Dividends. (5) Revenues. 1.1 th its financial statement: rating activities