Ch 2 Flashcards
(30 cards)
1) U.S. public companies are required to file their annual financial statements with the U.S. Securities and Exchange Commission on which form?
A) 10-A
B) 10-K
C) 10-Q
D) 10-SEC
B. * Public companies in the United States must fill financial results with the U.S. Securities and
Exchange Commission (SEC)
– On a quarterly basis (10-Q)
– On an annual basis (10-K)
2) Which of the following is NOT a financial statement that every public company is required to produce? A) Income Statement B) Statement of Sources and Uses of Cash C) Balance Sheet D) Statement of Stockholders’ Equity
B
3) The third party who checks annual financial statements to ensure that they are prepared according to GAAP and verifies that the information reported is reliable is the: A) NYSE Enforcement Board. B) Accounting Standards Board. C) Securities and Exchange Commission (SEC). D) auditor.
D
4) What is the role of an auditor in financial statement analysis?
- To ensure that the annual financial statements are prepared accurately. 2. To ensure that the annual financial statements are prepared according to GAAP. 3. To verify that the information used in preparing the annual financial statements is reliable.
5) What are the four financial statements that all public companies must produce?
Answer: 1. Balance Sheet 2. Income Statement 3. Statement of Cash Flows 4. Statement of Stockholder’s Equity
1) Which of the following balance sheet equations is INCORRECT? A) Assets - Liabilities = Shareholders’ Equity B) Assets = Liabilities + Shareholders’ Equity C) Assets - Current Liabilities = Long Term Liabilities D) Assets - Current Liabilities = Long Term Liabilities + Shareholders’ Equity
C
2) Cash is a: A) long-term asset. B) current asset. C) current liability. D) long-term liability
B
3) Accounts payable is a: A) long-term liability. B) current asset. C) long-term asset. D) current liability.
D
4) A 30 year mortgage loan is a: A) long-term liability. B) current liability. C) current asset. D) long-term asset
A
5) Which of the following statements regarding the balance sheet is INCORRECT? A) The balance sheet provides a snapshots of the firm’s financial position at a given point in time. B) The balance sheet lists the firm’s assets and liabilities. C) The balance sheet reports stockholders’ equity on the right hand side. D) The balance sheet reports liabilities on the left hand side.
D
Which of the following is an example of an intangible asset? A) Brand names and trademarks B) Patents C) Customer relationships D) All of the above are intangible assets
D
On the balance sheet, short-term debt appears: A) in the Stockholders’ Equity section. B) in the Operating Expenses section. C) in the Current Assets section. D) in the Current Liabilities section.
D
10) The firm’s assets and liabilities at a given point in time are reported on the firm’s: A) income statement or statement of financial performance. B) income statement or statement of financial position. C) balance sheet or statement of financial performance. D) balance sheet or statement of financial position
D
11) The statement of financial position is also known as the: A) balance sheet. B) income statement. C) statement of cash flows. D) statement of stockholder’s equity.
A
2) Gross profit is calculated as: A) Total sales - cost of sales - selling, general and administrative expenses - depreciation and amortization B) Total sales - cost of sales - selling, general and administrative expenses C) Total sales - cost of sales D) None of the above
C
Which of the following statements regarding the income statement is INCORRECT? A) The income statement shows the earnings and expenses at a given point in time. B) The income statement shows the flow of earnings and expenses generated by the firm between two dates. C) The last or “bottom” line of the income statement shows the firm’s net income. D) The first line of an income statement lists the revenues from the sales of products or services
A
3) Which of the following is NOT an operating expense? A) Interest expense B) Depreciation and amortization C) Selling, general and administrative expenses D) Research and development
A
5) The firm’s revenues and expenses over a period of time are reported on the firm’s: A) income statement or statement of financial performance. B) income statement or statement of financial position. C) balance sheet or statement of financial performance. D) balance sheet or statement of financial position
A
1) Which of the following is NOT a section on the cash flow statement? A) Income generating activities B) Investing activities C) Operating activities D) Financing activities
A
Which of the following is NOT a reason why cash flow may not equal net income? A) Amortization is added in when calculating net income. B) Changes in inventory will change cash flows but not income. C) Capital expenditures are not recorded on the income statement. D) Depreciation is deducted when calculating net income
A
4) Which of the following adjustments to net income is NOT correct if you are trying to calculate cash flow from operating activities? A) Add increases in accounts payable B) Add back depreciation C) Add increases in accounts receivable D) Deduct increases in inventory
C. decrease
5) Which of the following adjustments is NOT correct if you are trying to calculate cash flow from financing activities? A) Add dividends paid B) Add any increase in long term borrowing C) Add any increase in short-term borrowing D) Add proceeds from the sale of stock
A. Decrease
28) The firm’s asset turnover measures: A) the value of assets held per dollar of shareholder equity. B) the return the firm has earned on its past investments. C) the firm’s ability to sell a product for more than the cost of producing it. D) how efficiently the firm is utilizing its assets to generate sales.
D
29) If Firm A and Firm B are in the same industry and use the same production method, and Firm A’s asset turnover is higher than that of Firm B, then all else equal we can conclude: A) Firm A is more efficient than Firm B. B) Firm A has a lower dollar amount of assets than Firm B. C) Firm A has higher sales than Firm B. D) Firm A has a lower ROE than Firm B
A
