Question 1

Assets that are relatively liquid are classified as

Accepted Answer

A)   current assets.
B)   fixed assets.
C)   short-term assets.
D)   other assets.

Question 2

If a firm's current ratio _____, its liquidity _____.

Accepted Answer

A)   increases. increases
B)   increases, decreases
C)   decreases, increases
D)   increases, remains the same

Question 3

Which of the following is not used in determining a company's profitability on assets?

Accepted Answer

A)   return on assets
B)   debt ratio
C)   operating profit margin
D)   total asset turnover

Question 4

What four variables drive the amount of profit a company earns?

Accepted Answer

The four variables are the amount of sales, the cost of goods sold and operating expenses, the interest expense on borrowed funds, and taxes, which usually increase as the amount of income increases.

Question 5

The amount of the business owners' initial investment, owners' later investment in the business, and retained earnings comprise

Accepted Answer

A)   debt capital.
B)   accrued expenses.
C)   owners' long-term debt.
D)   owners' equity capital.

Question 6

The cash flow statement reflects cash flows from

Accepted Answer

A)   operating activities.
B)   investment activities.
C)   financing activities.
D)   operating, investment, and financing activities.

Question 7

Earnings before taxes are computed by deducting the firm's interest expense from its ____ income.

Accepted Answer

A)   total
B)   projected
C)   net
D)   operating

Question 8

Name and define three categories of assets.

Accepted Answer

Current assets are relatively liquid ass...

Question 9

Ownership equity represents the owner's investment in the company, which can be either his/her cash invested in the company or money borrowed from a bank to purchase fixed assets.

Accepted Answer

A) True 
 B)False

Question 10

Raw materials and products held by the firm for sale constitute _____.

Accepted Answer

A)   accounts payable.
B)   accounts receivable.
C)   cost of goods.
D)   inventories.

Question 11

Ownership equity is derived only from sources external to the firm.

Accepted Answer

A) True 
 B)False

Question 12

The cash flow statement measures cash flows on

Accepted Answer

A)   an annual basis.
B)   an accrual basis.
C)   a cash-basis.
D)   a normalized basis.

Question 13

The income statement shows the profit or loss from a firm's operations over a given period of time.

Accepted Answer

A) True 
 B)False  True

Question 14

An example of a current asset is

Accepted Answer

A)   land.
B)   inventories.
C)   equipment.
D)   buildings.

Question 15

The income statement reports a firm's results over a given period of time, but to determine a firm's complete financial position the cash flow statement is required.

Accepted Answer

A) True 
 B)False

Question 16

Accounts payable consist of payments due from a firm's customers.

Accepted Answer

A) True 
 B)False

Question 17

For their opening day, Ashley and Cameron bought $40 of "premium pink lemonade mix" and paper cups, which constituted their

Accepted Answer

A)   cash balance.
B)   fixed assets.
C)   inventories.
D)   cost of goods sold. C

Question 18

A profitable company does not necessarily have positive cash flows.

Accepted Answer

A) True 
 B)False

Question 19

The balance sheet shows a firm's assets, liabilities, and owners' equity at a specific point in time.

Accepted Answer

A) True 
 B)False

Question 20

Assets that can be converted to cash relatively quickly are said to be liquid.

Accepted Answer

A) True 
 B)False

Exam 10: Financial Statements

Assets that are relatively liquid are classified as

Correct AnswerverifiedShow Answer

If a firm's current ratio _____, its liquidity _____.

Correct AnswerverifiedShow Answer

Which of the following is not used in determining a company's profitability on assets?

Correct AnswerverifiedShow Answer

What four variables drive the amount of profit a company earns?

Correct AnswerverifiedThe four variables are the amount of sales, the cost of goods sold and operating expenses, the interest expense on borrowed funds, and taxes, which usually increase as the amount of income increases.

The amount of the business owners' initial investment, owners' later investment in the business, and retained earnings comprise

Correct AnswerverifiedShow Answer

The cash flow statement reflects cash flows from

Correct AnswerverifiedShow Answer

Earnings before taxes are computed by deducting the firm's interest expense from its ____ income.

Correct AnswerverifiedShow Answer

Name and define three categories of assets.

Correct AnswerverifiedCurrent assets are relatively liquid ass...View AnswerShow Answer

Ownership equity represents the owner's investment in the company, which can be either his/her cash invested in the company or money borrowed from a bank to purchase fixed assets.

Correct AnswerverifiedShow Answer

Raw materials and products held by the firm for sale constitute _____.

Correct AnswerverifiedShow Answer

Ownership equity is derived only from sources external to the firm.

Correct AnswerverifiedShow Answer

The cash flow statement measures cash flows on

Correct AnswerverifiedShow Answer

The income statement shows the profit or loss from a firm's operations over a given period of time.

Correct AnswerverifiedTrue

An example of a current asset is

Correct AnswerverifiedShow Answer

The income statement reports a firm's results over a given period of time, but to determine a firm's complete financial position the cash flow statement is required.

Correct AnswerverifiedShow Answer

Accounts payable consist of payments due from a firm's customers.

Correct AnswerverifiedShow Answer

For their opening day, Ashley and Cameron bought $40 of "premium pink lemonade mix" and paper cups, which constituted their

Correct AnswerverifiedC

A profitable company does not necessarily have positive cash flows.

Correct AnswerverifiedShow Answer

The balance sheet shows a firm's assets, liabilities, and owners' equity at a specific point in time.

Correct AnswerverifiedShow Answer

Assets that can be converted to cash relatively quickly are said to be liquid.

Correct AnswerverifiedShow Answer

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If a firm's current ratio _, its liquidity _.

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The four variables are the amount of sales, the cost of goods sold and operating expenses, the interest expense on borrowed funds, and taxes, which usually increase as the amount of income increases.

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Current assets are relatively liquid ass...
View Answer

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True

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C

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