Module 1

Question 1

The four key financial statements required by the SEC for reporting to shareholders are

Answer 1

1. Income Statement
2. Balance Sheet
3. Statement of Stockholder’s Equity
4. Statement of Cash Flows

Question 2

The ______ provides a financial summary of the firm’s operating results during a specified period.

Answer 2

Income Statement

Question 3

The statement begins with ______- the total dollar amount of sales during the period-from which the cost of goods sold is deducted.

Answer 3

Sales revenue

Question 4

The statement begins with sales revenue- the total dollar amount of sales during the period-from which the cost of goods sold is ____.

Answer 4

deducted

Question 5

The resulting _____ represents the amount remaining to satisfy operating, financial, and tax costs.

Answer 5

Gross profit

Question 6

The resulting gross profit represents the amount remaining to satisfy ______

Answer 6

operating, financial, and tax costs.

Question 7

Next, _____, which include selling expense, general and administrative expense, lease expense, and depreciation expense, are deducted from gross profits.

Answer 7

operating expenses

Question 8

Next, operating expenses, which include ______ are deducted from gross profits.

Answer 8

selling expense
general and administrative expense
lease expense
depreciation expense

Question 9

Next, operating expenses, which include selling expense, general and administrative expense, lease expense, and depreciation expense, are deducted from ____

Answer 9

Gross profits

Question 10

The resulting ______ represent the profits earned from producing and selling products; this amount does not consider financial and tax costs. (Operating profit is often called earnings before interest and taxes, or EBIT.)

Answer 10

Operating profits

Question 11

The resulting operating profits represent the profits earned from producing and selling products; this amount does not consider financial and tax costs. (Operating profit is often called _____ or _____.)

Answer 11

earnings before interest and taxed or EBIT

Question 12

___ are calculated at the appropriate tax rates and deducted to determine net profits (or earnings) after taxes.

Answer 12

Taxed

Question 13

Next, taxes are calculated at the appropriate tax rates and deducted to determine ____ (or ____) after taxes.

Answer 13

net profits or earnings

Question 14

Any _____ must be subtracted from net profits after taxes to arrive at earnings available for common stockholders. This is the amount earned by the firm on behalf of the common stockholders during the period.

Answer 14

preferred stock dividends

Question 15

Any preferred stock dividends must be subtracted from net profits after taxes to arrive at earnings available for _____. This is the amount earned by the firm on behalf of the common stockholders during the period.

Answer 15

common stockholders

Question 16

_____ represent the number of dollars earned during the period on behalf of each outstanding share of common stock.

Answer 16

Earnings per share or EPS

Question 17

The actual _____ is the dollar amount of cash distributed during the period on behalf of each outstanding share of common stock.

Answer 17

cash dividend per share (DPS)

Question 18

The _____ presents a summary statement of the firm’s financial position at a given time.

Answer 18

balance sheet

Question 19

_______ expected to be converted into cash within 1 year or less.

Answer 19

Current assets Short-term assets

Question 20

_______ expected to be paid within 1 year or less.

Answer 20

Current liabilities Short-term liabilities

Question 21

The _____ are listed from the most liquid down to the least liquid.

Answer 21

Assets

Question 22

____ are very liquid short-term investments such as Treasury bills or certificates of deposit, held by the firm.

Answer 22

Marketable securities

Question 23

Marketable securities are very liquid short-term investments such as _____, held by the firm.

Answer 23

Treasury bills or certificates of deposit

Question 24

Marketable securities are very liquid short-term investments such as Treasury bills or certificates of deposit, held by the ____.

Answer 24

firm

Question 25

____ are viewed as a form of cash ("near cash").

Answer 25

Marketable securities

Question 26

Marketable securities are viewed as a form of cash ("_____").

Answer 26

near cash

Question 27

____ represent the total monies owed the firm by its customers on credit sales.

Answer 27

Accounts receivable

Question 28

_____ include raw materials, work in process (partially finished goods), and finished goods held by the firm.

Answer 28

Inventories

Question 29

The entry for _____ is the original cost of all fixed (long-term) assets owned by the firm.

Answer 29

gross fixed assets

Question 30

The entry for gross fixed assets is the original ______ (long-term) assets owned by the firm.

Answer 30

cost of all fixed

Question 31

______ represent the difference between gross fixed assets and accumulated depreciation- the total expense recorded for the depreciation of fixed assets.

Answer 31

Net fixed assets

Question 32

The net value of fixed assets is called their _____.

Answer 32

book value

Question 33

The ______ are listed from short-term to long-term.

Answer 33

liabilities and equity accounts

Question 34

______ include accounts payable, amounts owed for credit purchases by the firm; notes payable, outstanding short-term loans, typically from commercial banks; and accruals, amounts owed for services for which a bill may not or will not be received.

Answer 34

Current liabilities

Question 35

_____ represents debt for which payment is not due in the current year.

Answer 35

Long-term debt

Question 36

_____ represents the owners' claims on the firm.

Answer 36

Stockholders' equity

Question 37

The ______ shows the historical proceeds from the sale of preferred stock.

Answer 37

preferred stock entry

Question 38

The amount paid by the original purchasers of common stock is shown by two entries, _____,______ in excess of par on common stock.

Answer 38

common stock and paid-in capital

Question 39

The _______ is the par value of common stock.

Answer 39

common stock entry

Question 40

The common stock entry is the ______of common stock.

Answer 40

par value

Question 41

The common stock entry is the par value of ______.

Answer 41

common stock

Question 42

_____ in excess of par represents the amount of proceeds in excess of the par value received from the original sale of common stock.

Answer 42

Paid-in capital

Question 43

Paid-in capital in excess of par represents the amount of proceeds in excess of the par value received from the ______.

Answer 43

original sale of common stock

Question 44

The sum of the ______ divided by the number of shares outstanding represents the original price per share received by the firm on a single issue of common stock.

Answer 44

common stock and paid-in capital accounts

Question 45

The sum of the common stock and paid-in capital accounts divided by the number of shares outstanding represents the original _____ received by the firm on a single issue of common stock.

Answer 45

price per share

Question 46

The sum of the common stock and paid-in capital accounts divided by the number of shares outstanding represents the original price per share received by the firm on a single issue of ______

Answer 46

common stock.

Question 47

_____ represent the cumulative total of all earnings, net of dividends that have been retained and reinvested in the firm since its inception.

Answer 47

Retained earnings

Question 48

It is important to recognize that _____ are not cash but rather have been utilized to finance the firm's assets.

Answer 48

retained earnings

Question 49

The ______ is an abbreviated form of the statement of stockholders' equity.

Answer 49

statement of retained earnings

Question 50

Unlike the statement of stockholders' equity, which shows all equity account transactions that occurred during a given year, the ______ reconciles the net income earned during a given

Answer 50

statement of retained earnings

Question 51

The ______ is a summary of the cash flows over the period of concern.

Answer 51

statement of cash flows

Question 52

The ______ provides insight into the firm's operating, investment, and financing cash flows and reconciles them with changes in its cash and marketable securities during the period.

Answer 52

Statement of cash flows

Question 53

______ is an important aspect of the firm's operations because it provides road maps for guiding, coordinating, and controlling the firm's actions to achieve its objectives.

Answer 53

Financial planning

Question 54

Financial planning is an important aspect of the firm's operations because it provides road maps for guiding, coordinating, and controlling the firm's actions to achieve its _____.

Answer 54

objectives

Question 55

Two key aspects of the financial planning process are

Answer 55

cash planning and profit planning

Question 56

___ involves preparation of the firm's cash budget.

Answer 56

Cash planning

Question 57

____ involves preparation of pro forma statements.

Answer 57

Profit planning

Question 58

Both the ____ and the _____ are useful for internal financial planning; they also are routinely required by existing and prospective lenders.

Answer 58

cash budget pro forma statements

Question 59

they also are routinely required by existing and prospective lenders.

Answer 59

Cash budget and pro forma statements

Question 60

The ____ begins with long-term, or strategic, financial plans.

Answer 60

financial planning process

Question 61

The financial planning process begins with ____, or ____, _____.

Answer 61

long term strategic, financial plans

Question 62

These in turn guide the formulation of ___, or ____, ___ and _____.

Answer 62

short-term, or operating, plans and budgets.

Question 63

Generally, the _____ and ____ implement the firm's long-term strategic objectives.

Answer 63

short-term plans and budgets

Question 64

_______ lay out a company's planned financial actions and the anticipated impact of those actions over periods ranging from 2 to 10 years.

Answer 64

Long-term (strategic) financial plans

Question 65

____ are part of an integrated strategy that, along with production and marketing plans, guides the firm toward strategic goals.

Answer 65

Long-term financial plans

Question 66

Long-term plans consider a number of financial activities:

Answer 66

- Proposed fixed asset investments - Research and development activities - Marketing and product development actions - Capital structure - Major sources of financing. - Termination of existing projects, product lines, or lines of business - Repayment or retirement of outstanding debts - Any planned acquisitions

Question 67

______ specify short-term financial actions and the anticipated impact of those actions.

Answer 67

Short-term (operating) financial plans

Question 68

These plans most often cover a 1- to 2- year period.

Answer 68

Short-term (operating) financial plans

Question 69

_____ include the sales forecast and various forms of operating and financial data.

Answer 69

Key inputs

Question 70

_____ include a number of operating budgets, the cash budgets, the cash budgets and the pro forma financial statements.

Answer 70

Key outputs

Question 71

______ begins with the sales forecast. From it, production plans are developed that take into account lead (preparation) times and include estimates of the required raw materials.

Answer 71

Short-term financial planning

Question 72

Using the ______ , the firm can estimate direct labor requirements, factory overhead outlays, and operating expenses.

Answer 72

production plans

Question 73

Once these estimates have been made, the firm's _____ and ____ can be prepared.

Answer 73

pro forma income statement cash budget

Question 74

What are the information needed for short term financial planning?

Answer 74

Sales Forecast Production Plans Long term Financial Plans Fixed Asset Outlay Plan Current-Period Balance Sheet

Question 75

What are output for analysis on short term financial planning?

Answer 75

Pro Forma Income Statement Cash Budget Pro Forma Balance Sheet