Exam 10: Understanding a Firms Financial Statements

Match the term with its definition. -Costs related to marketing and selling a firm's product or service, general and administrative expenses, and depreciation

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

Match the term with its definition. -Sales less the cost of goods sold

Candace purchased a car for her company's exclusive use. The value of this car

Match the term with its definition. -The cost of borrowed money

Match the term with its definition. -The cost of producing or acquiring goods to be sold by a firm

Match the term with its definition. -An accounting method of recording profits when earned and expenses when incurred, whether the profits have been received in cash or the expenses paid

Horace is reviewing a document that shows the results of his firm's operations over a period of one year. Horace is looking at the

The payment of dividends to owners of a business would _____ on the statement of cash flows.

Match the term with its definition. -Financing provided by creditors

Raul needed an expensive piece of equipment to expand his business. He borrowed the money from the bank and pledged the equipment as _____. If Raul does not repay the loan, the bank can take his equipment.

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

Accounts receivable represent credit extended by suppliers to a firm when it purchases inventory.

The income statement answers which of the following questions?

Which of the following is a reason why profits based on an accrual-basis accounting system will differ from the firm's cash flows?

Profits reward owners for investing in a company, but they do little to promote future growth.

Match the term with its definition. -Physical assets that will be used in the business for more than one year, such as equipment, buildings, and land

Jane has been asked by a group of investors to give an overall picture of her firm's financial situation. To do so, she should provide them with a copy of the firm's income statement and balance sheet.

Match the term with its definition. -Agreements to repay cash amounts borrowed from banks or other lending sources within 12 months or less

To calculate his company's _____, Edgar will deduct operating expenses from gross profits.