Chapt. 4

Question 1

Liabilities that are expected to be satisfied within one year of the balance sheet date are

Answer 1

Current Liabilities

Question 2

Provides a snapshot of a company’s financial position at a point in time

Answer 2

Balance Sheet

Question 3

Which of the following are true of Retained Earnings? (select all that apply)

• It is increased by the declaration of dividends
• It is increased by the net income of the business

It measures the cumulative earnings less cumulative dividend distributions

• It represents the cumulative earnings that have been reinvested in the business.

Answer 3

• It is increased by the net income of the business

It measures the cumulative earnings less cumulative dividend distributions

• It represents the cumulative earnings that have been reinvested in the business.

Question 4

Current assets on the balance sheet include (select all that apply)

• accounts receivable
• land held as an investment
• inventory
• accounts payable
• cash and cash equivalents

Answer 4

Current Assets = assets expected to be converted to cash or used up within one year or the company’s operating cycle.

• accounts receivable
• inventory
• cash and cash equivalents

Question 5

Must be presented in addition to an income statement and a balance sheet because cash flows and accrual earnings can differ dramatically.

Answer 5

A Statement of Cash Flows

Question 6

Goodwill is a noncurrent _________ asset.

Answer 6

Goodwill is a noncurrent Intangible asset

Question 7

Cash on the Statement of Cash Flows is broken down into which of the following categories?

Answer 7

Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities

Question 8

Financing activities include

• the purchasing of equipment
• the payment of dividends
• the issuance of common stock
• the purchase of inventory

Answer 8

The payment of dividends & the issuance of common stock

Question 9

Which of the following are true regarding a statement of cash flows? (Select all that apply)

• Firms must present a statement of cash flows in addition to an income statement and a balance sheet
• Equity analysts need to understand a firm’s cash flows in order to assess its liquidity and creditworthiness
• The cash flow statement explains the causes for year-to-year changes in cash and cash equivalents
• A firm’s cash flows and accrual earnings rarely differ.

Answer 9

• Firms must present a statement of cash flows in addition to an income statement and a balance sheet
• The cash flow statement explains the causes for year-to-year changes in cash and cash equivalents