Financial Statements

Question 1

What is a financial statement made up of

Answer 1

Balance sheets,
Income statement
Cash Flow Statements

Question 2

What does a balance sheet show

Answer 2

Shows an overview of the assets, liabilities and stockholders equities at a snapshot in time

It shows us how assets of a company are funded - either with liabilities like debts, or stock holders equity

Question 3

What does the income statement show

Answer 3

This shows a company’s revenues and expenses during a particular period

Question 4

What does the cash flow statement show

Answer 4

How well a company generates cash to pay its debt obligations, fund operating expenses and fund investments

Question 5

How are assets and liabilities ordered in the balance sheet ordered

Answer 5

Assets ordered by liquidity

Liabilities ordered by which will be paid first

Question 6

How are the total assets of a company calculated from a balance sheet

Answer 6

Total liabilities + shareholders equity

Question 7

What is shareholders equity and how is it calculated

Answer 7

This is the company’s total assets minus its total liabilities

Shareholders equity represents the amount of money that would be returned to shareholders if all of the assets were liquidated and all of the company’s debt was paid off

Question 8

What are retained earnings

Answer 8

These are a part of the shareholder’s equity and are the amount of net earnings that were not paid to shareholders as dividends

Question 9

How do you calculate the net income from an income statement

Answer 9

Subtract the total expenses from the revenue for the period chosen

Question 10

What is operating revenue

Answer 10

This is the revenue earned by selling a company’s products or services - how well is the company selling its products/services

Question 11

What is non-operating income

Answer 11

This is the income earned from non-core business activities and that fall outside of the primary function of the business

Question 12

What are some ways that non -operating income is generated

Answer 12

• Interest earned on cash in the bank
• Rental income from a property
• Income from strategic partnerships like royalty payment receipts
• Income from an advertisement display located on the company’s property

Question 13

What are primary expense incurred from

Answer 13

This comes from the prices of earning revenue

Question 14

What primary expenses can be incurred from earning revenue

Answer 14

• Cost of goods sold
• sellings
• General administrative and expenses,
• Depreciation or amortisation
• Employee wages
• Sales commissions
• Utilities like electricity and transportation

Question 15

What forms of secondary expenses are there

Answer 15

• Interest paid on loans or debt

- Losses from the sale of an asset are also recorded as expenses

Question 16

What does a cash flow statement show to investors

Answer 16

This shows where the money of a company is coming from and how its being spent

Question 17

What sections in a cash flow statement are reported to report the cash flow for the activities of a company

Answer 17

• Operating activities
• Investing activities
• Financing activities

Question 18

What does the operating activities on a cash flow statement tell you

Answer 18

This includes any sources and uses of cash from running the business and selling its products or services.

Question 19

What are the some of the things that make up the cash from operations

Answer 19

• Changes made in cash
• Accounts receivable
• Depreciation
• Inventory
• Accounts payable
• Also wages and dat

Question 20

What does the investing activities on a cash flow statement tell you

Answer 20

This includes any sources and uses of cash from a company’s investments into the long term future of the company.

Question 21

What are some of the things that make up the cash from investing activities on a cash flow statement

Answer 21

• A purchase or sale of an asset
• Loans made to vendors or received from customers
• Payments related to a merger or acquisition
• Properties
• Equipment

Question 22

What does the financing activities tell you in the cash flow statement

Answer 22

This includes the sources of cash from investors or banks as well as the uses of cash paid to shareholders

Question 23

What are some of the things that make up the cash from financing activities on a cash flow statement

Answer 23

• Debt issuance
• Equity issuance
• Stock repurchases
• Loans
• Dividends paid
• Repayments of debt