Ch. 5 Financial Position and Cash Flow

Question 1

What information does the SFP provide

Answer 1

Info about a company’s liquidity and solvency to assess the investment risk.
It shows if the company is financed primarily by debt or equity.

Question 2

What are monetary assets

Answer 2

Money or claims to money that are fixed in amounts and timing

Ex. A/P, notes payable, long-term debt

Question 3

What are non-monetary assets

Answer 3

Assets with a value that is not fixed

Ex. Inventory, PPE, certain investments, intangibles

Question 4

What are financial instruments

Answer 4

Contracts between two or more parties. Creates a financial asset for one party and a liability or equity instrument for the other.

Question 5

Define liquidity

Answer 5

A company’s ability to convert assets into cash to pay off its current liabilities

Question 6

Define solvency

Answer 6

A company’s ability to pay its debts and interest

Question 7

What is working capital

Answer 7

The excess of total current assets over total current liabilities

Question 8

What is the current cash debt coverage ratio

Answer 8

Net cash provided by operating activities / Avg. current liabilities

Shows company’s financial liquidity

Question 9

What is the cash debt coverage ratio

Answer 9

Net cash provided by operating activities / Avg. total liabilities

Shows company’s financial flexibility

Question 10

How are FV-NI and FV-OCI investments classified on the SFP

Answer 10

FV-NI is a current asset

FV-OCI is a long-term investment