Chapter 3 Essentials

Question 1

Chapter 3 focuses on the what?

Answer 1

Financial Statements

Question 2

The balance sheets includes all three items in the fundamental relationship

Answer 2

Assets, Liabiltiies, and Common Equity

Question 3

Current Assets

Answer 3

Cash + Marketable Securities + AR + Inventory + Prepaid Expenses + Other Current Assets

Question 4

Total Assets

Answer 4

Current Assets + Long Term Assets + Goodwill + Other Assets

Question 5

Current Liabilities

Answer 5

AP + Notes Payable + Current Portion of Long-Term Debt + Other Current Liabilities

Question 6

Total Liabilities

Answer 6

Current Liabilities + Long-term Liabilities + Deferred Income Tax + Other Long-Term Liabilities

Question 7

Common Equity

Answer 7

Common Stock + Retained Earnings

Question 8

Profit

Answer 8

Revenue - Costs and Expenses

Question 9

Cost of Sales

Answer 9

Beg. Inventory + Cost of Purchases - End Inventory

Question 10

Gross Profit

Answer 10

Revenue - Cost of Sales

Question 11

EBIT

Answer 11

Gross Profit - Operating Expenses

Question 12

EBITDA

Answer 12

EBIT + Depreciation & Amortization

Question 13

Net Earnings

Answer 13

Earnings before Income Taxes - Incomes Taxes

Question 14

Net Earning available to Common Shareholders

Answer 14

Net Earnings - Preferred Dividends

Question 15

Sources and Uses Statement

Answer 15

Compares changes in balance sheet items

Question 16

Sources of Cash

Answer 16

Increases in liabilities, increases in equity, decreases in assets,

Question 17

Use of Cash

Answer 17

Decrease in liabilities, decrease in equity, increase in assets

Question 18

Cash Flow Statement

Answer 18

Actual cash inflows and outflows of cash related to operating investing, and financing activities

Question 19

Cash Flows from Operating Activities

Answer 19

Net Earnings + Noncash Items +/- Changes in Operating Assets and Liabilities

Question 20

Cash Flows from Investing Activities

Answer 20

• Capital Expenditures + Proceeds from Sale of Property/Equip/Businesses - Payments for Businesses Acquired

Question 21

Cash Flows from Financing Activities

Answer 21

+/- Proceeds from Repayments of Long-Term Borrowing, Proceeds from Repurchase of Common Stock - Cash Dividends +/- other Financing Activities

Question 22

Cash at End of Year

Answer 22

Change in Cash +/- Effect of Exchange Rate + Cash at Beg of Year

Question 23

Balance Sheet

Answer 23

Helps you know what the firm owns and what the firm owes

Question 24

Income Statements

Answer 24

Helps you know how much revenue was generated, what costs and expenses were incurred, and how profitable the firm was

Question 25

Cash Flow Statements

Answer 25

Helps identify the extent to which cash was generated from operating activities, how much cash was invested, and how much cash was used to finance the activities with which the firm was involved