Financial Statements Quiz

What are financial statements?

• Records that show the employee salaries of a business

• Statements that track the inventory of a business

• Documents that outline the marketing strategies of a business

• Reports that summarize the activities and financial performance of a business

What is the purpose of financial statements?

• To give investors and lenders an understanding of a business's financial health

• To provide a breakdown of a business's marketing expenses

• To track the number of employees in a business

• To calculate the taxes owed by a business

Which financial statement gives a snapshot of a business's assets, liabilities, and equity at a single point in time?

• Statement of profit and loss

• Cash flow statement

• Balance sheet

• Income statement

What does the balance sheet show?

• The cash inflows and outflows of a business

• The revenue and expenses of a business over a period of time

• What a business owns and what it owes

• The profitability of a business

What is the accounting equation that the balance sheet must adhere to?

• Assets + Liabilities = Equity

• Assets = Liabilities - Equity

• Assets = Liabilities + Equity

• Assets - Liabilities = Equity

Which financial statement summarizes a business's revenues and expenses over a period of time?

• Income statement

• Balance sheet

• Cash flow statement

• Statement of profit and loss

What does the income statement show?

• The profitability of a business over a period of time

• The cash inflows and outflows of a business

• The assets, liabilities, and equity of a business

• The marketing expenses of a business

What is the net profit of a business?

• The total revenue earned by a business

• The total expenses incurred by a business

• The difference between revenue and expenses

• The total assets of a business

Why do businesses need a cash flow statement?

• To reconcile the difference between revenue and expenses

• To show the cash inflows and outflows over a period of time

• To calculate the taxes owed by a business

• To track the inventory of a business

What is the cash flow statement used for?

• To show the cash inflows and outflows over a period of time

• To provide a breakdown of a business's marketing expenses

• To give investors and lenders an understanding of a business's financial health

• To track the number of employees in a business