Exam 3: Understanding Financial Statements and Cash Flows

What information does a firm's balance sheet provide to the viewing public?

The balance sheet equation is Total Assets = Total Revenues - Total Liabilities.

Intangible assets such as copyrights and goodwill are not included on the balance sheet because they are impossible to value objectively.

Given the information below,calculate the company's cash balance at the end of the year.

Which of the following accounts does NOT belong on the asset side of a balance sheet?

If a company's cash balance increases during the year,and the company also reports positive net income,then the company's retained earnings balance must increase.

Generally Accepted Accounting Principles (GAAP)is a set of principle-based accounting standards established by the Financial Accounting Standards Board (FASB).

Racing Horse Corporation reported net income for 2010 of $200,000,sales of $540,000,expenses (excluding depreciation)of $180,000,and depreciation expense of $60,000.The company's accounts receivable balance increased by $40,000 during the year and its accounts payable balance remained the same.The company's change in cash for the year is estimated to be

What financial statement explains the changes that took place in the firm's cash balance over a period?

Net profit margin is equal to the gross profit margin times the operating profit margin.

An income statement reports a firm's cumulative revenues and expenses from the inception of the firm through the income statement date.

Additional Paid in Capital on the balance sheet equals the amount paid by investors for the company's common stock that exceeds the market price of the stock at the time of purchase.

Please refer to Table 3-2 for the following questions. Table 3-2 Enigma has the following financial information: No changes were made in interest payable or taxes payable. -Based on the information in Table 3-2,what is Enigma's cash flow from operations?

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000; Rogue's operating profit margin is equal to

Examples of uses of cash include

The profit and loss (income)statement is compiled on a cash basis.

In the United States,financial statements are prepared following the Financial Accounting Standards Board's generally accepted accounting principles (GAAP).

The income statement describes the financial position of a firm on a given date.

Why doesn't an income statement provide a measure of a firm's cash flows?

How is taxable income computed?