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3. (TCO 4) Name and describe one liquidity ratio. What does this ratio
measure? What is the formula for this ratio?
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ACCT 212 Week 4 Midterm (Set 3)
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1. (TCO 1) Suppose your company paid $12,000 in cash for its rent. Ho
w does this transaction impact the accounting equation?
2. (TCO 2) Suppose your company sold $25,000 in merchandise to a cus
tomer for credit. How does this transaction impact the accounting equati
on?
3. (TCO 3) Opportunity is one of the components of the fraud triangle. H
ow can a company reduce opportunity as a fraud risk? Give an example
of how someone could use opportunity to commit fraud and how the co
mpany could reduce this risk.
4. (TCO 4) What is horizontal analysis of financial statements? How doe
s horizontal analysis differ from vertical analysis?
1. (TCO 3) Prenumbered documents are a key feature in an internal cont
rol system. Why are prenumbered documents such an important internal
control? Give an example of prenumbered documents as an internal cont
rol.
2. (TCO 1) Describe the balance sheet. Why is this statement important t
o the company, creditors, and investors?
3. (TCO 4) Name and describe one profitability ratio. What does this rati
o measure? What is the formula for this ratio?
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