Given That Measuring a Firm's Financial Health Is Important to Its

question 167

Multiple Choice

Given that measuring a firm's financial health is important to its survival, which of the following strategies is good advice for a person just starting a business?

• A) Create a method for keeping your books that makes sense to you. Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books.
• B) All transactions are important. Separating transactions only serves to create a perception that some transactions are of lesser importance than others.
• C) Accounting systems used by big business are not suitable for small businesses.
• D) Select an accounting system that helps you make decisions, and helps you report information to others outside your firm.

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Definitions:

Tax Liability

The total amount of taxes an individual or organization is legally obligated to pay to a taxation authority.

Taxable Income

The amount of income used to determine how much tax an individual or a company owes to the government.

Taxable Income

The portion of an individual's or corporation's income that is subject to taxes according to federal, state, or local laws.

Tax Liability

The total amount of tax that an individual or business owes to the government.