The Focus of Substantive Tests in the Finance and Investment

question 95

Multiple Choice

The focus of substantive tests in the finance and investment cycle is on

• A) Reconciliation of detailed listings with general ledger amounts.
• B) Proper cut-off.
• C) Search for unrecorded items.
• D) Gaining an understanding and verifying amounts and calculations.

Recognize and apply different cost behaviors to various business scenarios through graph representation.

Calculate the operating income based on different levels of production and sales.

Understand how cost-volume-profit (CVP) analysis aids in decision making.

Determine the contribution margin and its significance in business operations.

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Definitions:

Times Interest Earned

A metric to assess a company's ability to meet its debt obligations, calculated as earnings before interest and taxes divided by interest expense.

Balance Sheet

A ledger detailing the assets, liabilities, and equity of shareholders of an enterprise at a specific timeframe.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, including revenues, expenses, and profit or loss.

Gross Margin

The difference between sales revenue and the cost of goods sold, often expressed as a percentage of sales.