Understanding Finance

Test Yourself

This section offers ten multiple-choice questions to help you identify your baseline knowledge of finance essentials. Answers to the questions are given at the end of the test.

1. If you want to recognize revenue during the period in which the related sales activity occurred, which accounting method would you use?

1. Accrual accounting.
2. Cash-basis accounting.

2. Which of the following would be considered a cost of goods sold?

1. Administrative employee salaries.
2. Sales and marketing costs.
3. Rents.
4. Assembly labor costs.
5. Advertising costs.

3. In most finance systems, what is the time frame that distinguishes short-term liabilities, also known as current liabilities, from long-term liabilities?

1. Short-term liabilities typically have to ...