Chapter 17.2

Question 1

accounting cycle

Answer 1

is the sequence of steps businesses follow to record, summarize, and report financial information

Question 2

stakeholder

Answer 2

People with interest in the business
Lenders want to know loans will be repaid on time
Vary depending on type of business (partnership, proprietorship, etc.)

Question 3

balance sheet

Answer 3

reports the assets, liabilities, and owner’s equity

Question 4

cash flow statement

Answer 4

reports how cash moves into and out of a business

Question 5

income statement

Answer 5

reports business revenue and expenses for a specific period; shows net income or net loss

Question 6

financial ratio

Answer 6

evaluate overall financial condition of the business by showing relationships between selected figures on financial statements

Question 7

working capital

Answer 7

is difference between current assets and current liabilities

Question 8

current asset

Answer 8

is cash or any asset that will be exchanged for cash or used within one year

Question 9

current liability

Answer 9

is a short-term debt that must be paid within one year

Question 10

current ratio

Answer 10

shows relationship of current assets to current liabilities

Question 11

debt ratio

Answer 11

shows percentage of dollars owed compared to assets owned

total liabilities ÷ total assets = debt ratio

Question 12

net profit ratio

Answer 12

illustrates how much profit is generated per dollar of sales

Question 13

operating ratio

Answer 13

shows relationship of expenses to sales