Chapter 1

Question 1

3 Forms of a business organization

Answer 1

Sole proprietorship, partnership, corporation

Question 2

Adv to sole prop.

Answer 2

Simple to establish, owner controlled, tax advantages

Question 3

Adv to partnership

Answer 3

Simple to establish, shared control, tax adv

Question 4

Adv of corporation

Answer 4

Easy to transfer, easy to raise funds, no personal liability

Question 5

Internal users

Answer 5

Finance, marketing, management, human resources

Question 6

External users

Answer 6

Investors, creditors

Question 7

Solving ethical dilemmas

Answer 7

recognize, identify principal elements, identify alternatives, weigh impact of different stakeholders

Question 8

3 types of business activity

Answer 8

Financing, investing and operating

Question 9

2 primary sources of outside funds

Answer 9

Borrowing and issuing/selling shares

Question 10

Revenue

Answer 10

Increase in assets or decrease in liabilities from the sale of goods or performance of service

Question 11

Expense

Answer 11

Cost of assets consumed or services used

Question 12

Liabilities arise from…

Answer 12

Expenses

Question 13

hat are the 4 financial statements

Answer 13

Income, retained earnings, balance sheet, statement of cash flow

Question 14

Income statements reports…

Answer 14

Specific time period, net income/net loss

Question 15

Retained earnings statement shows…

Answer 15

Amounts and causes of changes in retained earnings during specific time period (same as income statement)

Question 16

What can retained earning statements be used to evaluate

Answer 16

Dividend payment practices

Question 17

Balance sheet reports…

Answer 17

Specific time POINT, assets, liabilities and stock holders equity

Question 18

Assets =

Answer 18

Liabilities + stockholders equity

Question 19

What does statement of cash flow tell us

Answer 19

Where did cash come from
How was cash used
What was the change in cash during balance period

Question 20

Annual reports always include…

Answer 20

Financial statements, management discussion and analysis, notes to financial statements, auditors report

Question 21

Management discussion and analysis

Answer 21

Presents managements view on the company’s ability to pay near-term obligations, its ability to fund operations and expansions, and its results of operations