Financial Literacy Assessment
Welcome to the Governance Solutions Financial Literacy Assessment Tool.
In just 21 questions you can learn (or confirm!) where your boardroom financial literacy level lies.
Welcome to the Governance Solutions Financial Literacy Assessment Tool.
In just 21 questions you can learn (or confirm!) where your boardroom financial literacy level lies.
Generally accepted accounting principles:
a) Get their authority from legal precedence
b) Include a set of accounting concepts and principles that guide accountants in preparing financial statements
c) Must be followed by all firms because they are law
d) Obtain their credibility and authority from the general recognition and acceptance by the accounting profession
e) B and D above
The accounting definition of an asset does not include things that:
a) An organization owns
b) An organization has the right to use
c) Had past value
d) Have future value
e) All of the above
The primary purpose of the cash flow statement is to report:
a) All inflows and outflows of cash during the period
b) Assets owned and claims against those assets at the end of the period
c) Liability changes made by the financial department of the company during the period
d) All of the above
An example of an efficiency ratio is:
a) Operating expense divided by total revenue
b) Comparing the organization’s total debt to its total equity
c) Cash and cash equivalents divided by current liabilities
d) All of the above
The definition of a restricted asset is:
a) An account or other balance with limited right of access or withdrawal
b) Refers to income received from an external source, which has not been entirely spent and the balance can only be spent as specified by the grant or by legislation
c) Assets that someone else has some title to
d) All of the above
The purpose of an audit is to:
a) Endorse the quality of leadership management provides to the organization
b) Prove the accuracy of the financial statements
c) Lend credibility to the entity’s financial statements
d) B and C above
Examples of a generally accepted accounting principle are:
a) The objectivity principle
b) The time period concept
c) The measurement principle
d) The full disclosure principle
e) All of the above
On January 1, 2021 the organization had assets of $20M and equity of $5M. Over the course of the year assets increased by $3M and equity decreased by $1M. On December 31st of 2021 the liabilities of the organization were?
a) $21M
b) $27M
c) $19M
d) Need more information to calculate the liabilities
Obligations due within a year are called:
a) Expenses
b) Current liabilities
c) Long-term liabilities
d) Current assets
An example of a liability is:
a) Equipment
b) Employee Taxes Payable
c) Rent Expenses
d) Dividends
An expenditure to install a new electrical system is a:
a) Capital expenditure
b) Repair expenditure
c) Neither capital or repairs expenditures
d) Both repair and capital expenditures
The purpose of MD&A (management discussion and analysis) in the financial statements includes:
a) Providing an analysis of historical data
b) Providing a narrative explanation
c) Providing context not provided in the financial statements
d) All of the above
e) None of the above
The auditor should keep the Audit Committee informed of:
a) Illegal acts/frauds
b) All significant misstatements
c) Management’s judgments and estimates of accounting-related issues
d) All of the above
Recording expenses in the same time period as related revenues is called:
a) Cost Recovery
b) Cash Basis
c) Operating Cycle
d) Matching
The responsibility for the proper preparation and presentation of the financial statements is the responsibility of:
a) Management
b) The Board
c) The Audit Committee
d) The Auditor
e) All of the above
The concept that states that a financial statement item would make a difference if its omission or misstatement would tend to mislead the reader of the financial statements is the:
a) Cost-benefit Criterion
b) Going Concern Convention
c) Entity Concept
d) Materially Convention
The definition of gross margin is:
a) Revenues less direct operating costs
b) Revenues less cost of goods sold plus depreciation and amortization
c) Revenue less operating expenses
d) None of the above
The external auditor is not responsible for:
a) Considering the possibility of fraud
b) Providing complete assurance of the correctness of the financial statements
c) Being aware of the potential for the occurrence of errors
d) Maintaining an attitude of professional skepticism
e) All of the above
Which following statement accurately describes equity?
a) The financial worth of the organization
b) The owners’ claims to the assets of the organization
c) The creditors’ claims to the assets of the company
d) The value of assets contributed to the organization by the owner
e) None of the above
What is the purpose of private meetings between the audit committee and the auditors?
a) To evaluate the CFO
b) To allow the auditors to express concerns to the committee without management present
c) To allow the audit committee to press the external auditors for lower fees
d) To reinforce the independence of the committee to the management team
e) All of the above
An example of an off balance sheet item is:
a) Letter of credit
b) Contingent Liabilities
c) Loan commitments
d) All of the above
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