What does the term "inventory" refer to in a business context?

Unsold products waiting to be sold.

Customers' outstanding payments.

The company's buildings and land.

The company's intellectual property.

Why do companies maintain inventory?

To keep their factories running continuously.

To prevent late payments from customers.

To maintain a steady stream of goods to retailers.

To lower the company's tax liability.

What is the difference between tangible and intangible assets?

Tangible assets are physical, while intangible assets are non-physical.

Tangible assets are used for production, while intangible assets are used for marketing.

Tangible assets are more valuable than intangible assets.

Tangible assets are easier to sell than intangible assets.

What is a common reason for a company to maintain accounts receivable?

To purchase raw materials in bulk.

To protect against unanticipated increases in demand.

To receive payments from customers on credit.

To take advantage of price breaks.

What is the primary purpose of maintaining inventory?

To take advantage of bulk ordering.

How do companies typically account for finance leases?

Allocate initial direct costs to finance income.

What is the main difference between a finance lease and an operating lease?

Finance leases transfer ownership to the lessee, while operating leases do not.

Finance leases are for shorter terms than operating leases.

Finance leases always involve tangible assets, while operating leases involve intangible assets.

Operating leases are recognized as assets and liabilities on the balance sheet.

How do companies typically recognize income from operating leases?

Recognize income on a straight-line basis.

Recognize income when the lease term ends.

Recognize income based on market rates.

Components of Financial Statements Free MCQ Practice Test with Solutions

	Financial Analysis and Reporting 2 videos\|51 docs\|19 tests

	Financial Analysis and Reporting 2 videos\|51 docs\|19 tests

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