Exam 10: Understanding a Firms Financial Statements

Match the term with its definition. a.Accrued expenses b.Cash flow activities c.Cash flow statement d.Fixed assets e.Gross fixed assets f.Long-term debt g.Other assets h.Short-term notes -A financial report showing a firm's sources of cash as well as its uses of cash

Natalya reports profits when cash is received and expenses when they are paid.She is using

Eugenia's company bought a delivery truck to deliver merchandise to customers.This truck should appear as ___________ on the balance sheet.

Irma's current ratio is 2.5.This means that:

The cash flow statement answers the questions "From where did the cash come?' and "Where did the cash go?"

Total assets less short-term debt equals ownership equity.

Depreciation is the cost of a firm's land and building allocated over its useful life.

The major difference between cash-basis accounting and accrual-basis accounting is when the firm recognizes revenue and profits.

Marvin is preparing one of the annual financial statements and has asked you which of the following should be inlcuded in operating expenses.You tell him it is:

What five areas of business activity need to be examined to answer the question "How profitable is the business?"

Depreciation is added back on the cash flow statement in which activity section?

The best financial ratio to determine a company's ability to pay debt is the operating profit margin.

Net income is used to measure the return on the firm's total assets.

Match the term with its definition. a.Cost of goods sold b.Gross profit c.Long-term notes d.Net profits e.Operating profits f.Profit margins g.Profits before taxes h.Total asset turnover -Agreements to repay cash amounts borrowed from banks or other lending sources,plus interest,for periods longer than 12 months

Kermit calculated his total asset turnover to be 1.13.This tells Kermit that:

The income statement answers the question: "How profitable is the business?"

Liquidity represents the degree to which a firm can meet maturing short-term debt obligations with available working capital.

Guenther bought merchandise for his retail business on credit and sold some of it for cash.To record his purchases on his cash flow statement,Guenther will:

Kate's banker would like to know the profit of her business from January 1st through December 31.She should show him the _______.

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