Chapter 14

Question 1

What is considered a record of daily transactions?

Answer 1

Journal

Question 2

What is a summary of the company’s revenues and expenses over a given period of time and is sometimes called the profit-and-loss statement?

Answer 2

The Income Statement

Question 3

Income - Cost of Goods Sold = ______

Answer 3

Gross Profit

Question 4

Gross Profit - Expenses = ___________

Answer 4

Net Income

Question 5

Current Assets divided by Current Liabilities = _______________________

Answer 5

Liquidity (or Current) Ratio

Question 6

What ratio determines if the company can pay its current debts?

Answer 6

The Liquidity Ratio

Question 7

(Current Assets - Inventory) divided by Current Liabilities = _____________

Answer 7

Quick Ratio

Question 8

What is also known as the quick ratio?

Answer 8

The Acid Test Ratio

Question 9

Which ratio measures how effectively the company manages its credit?

Answer 9

The Activity Ratio

Question 10

Revenue divided by Days in the Business Year = __________________

Answer 10

Sales per Day

Question 11

Current Receivables divided by Sales per Day = _______________________

Answer 11

Average Collection Period

Question 12

Which ratio measures the percent total funds provided by creditors?

Answer 12

The Debt Ratio

Question 13

Total Debt divided by Total Assets = ___________________________

Answer 13

Debt Ratio

Question 14

Net Income divided by Revenues = _________________________

Answer 14

Profit Margin

Question 15

Net Profit (after taxes) divided by Total Assets = _____________________

Answer 15

Return on Total Assets

Question 16

Between the Cash Method and the Accrual Method, which is the easiest accounting method?

Answer 16

Cash Method

Question 17

Which accounting method gives an inaccurate picture of the company’s overall financial situation?

Answer 17

Cash Method

Question 18

Which accounting method recognizes income as services occur, not when money is collected?

Answer 18

The Accrual Method

Question 19

Project Costs Incurred divided by Total Estimated Costs = _____________________

Answer 19

Percentage of Completion

Question 20

Percentage of Completion x Contract Amount = _______________

Answer 20

Cumulative Earnings

Question 21

Cumulative Earnings - Amount Billed to Date = _____________________

Answer 21

Billing Overage/Deficiency

Question 22

Which act ensures that federal contractors are paid in a timely manner?

Answer 22

The Federal Prompt Payment Act

Question 23

Under the Federal Prompt Payment Act, prime contractors must receive payment within ________ days after submitting a progress payment invoice.

Answer 23

14

Question 24

Under the Federal Prompt Payment Act, prime contractors must pay subcontractors within ______ days after receiving payment, or they must pay interest penalties.

Answer 24

7

Question 25

Under the North Carolina Prompt Pay Law, payments to the prime contractor must be made within _____ days after completion of the project.

Answer 25

45

Question 26

Under the North Carolina Prompt Pay Law, if the final payment is delayed past the 45 days, the prime contractor is due _____ percent interest per month on the unpaid balance.

Answer 26

One