LECTURE 8: Financial Statements

Which of the following is NOT included in financial statements?

• • A. Balance Sheet

• • B. Income Statement

• • C. Cash Flow Statement

• • D. Marketing Report

What does the balance sheet provide an overview of?

• • A. Revenues and expenses

• • B. Assets, liabilities, and stockholders' equity

• • C. Cash inflows and outflows

• • D. Sales and marketing expenses

Which equation represents the balance sheet formula?

• • A. Assets = Revenues + Expenses

• • B. Liabilities = Assets + Owner’s Equity

• • C. Assets = Liabilities + Owner’s Equity

• • D. Equity = Assets + Liabilities

Which characteristic is NOT associated with an asset?

• • A. Probable future benefit

• • B. Controlled by the entity

• • C. Resulting from a past transaction

• • D. A liability to be paid

What type of liability is a mortgage payable?

• • A. Current liability

• • B. Long-term liability

• • C. Contingent liability

• • D. Accrued liability

Which of the following is a contingent liability?

• • A. Accounts payable

• • B. Mortgage payable

• • C. Deferred tax liabilities

• • D. A probable liability depending on an uncertain event

What is included in shareholders' equity?

• • A. Liabilities

• • B. Total assets minus total liabilities

• • C. Total revenues

• • D. Total expenses

Retained earnings should not be confused with which of the following?

• • A. Revenues

• • B. Expenses

• • C. Net income

• • D. Liabilities

Operating revenue is generated from:

• • A. Interest earned on cash in the bank

• • B. Rental income from property

• • C. Core business activities

• • D. Strategic partnerships

The cash flow statement (CFS) measures how well a company generates cash to:

• • A. Pay its debt obligations

• • B. Fund its operating expenses

• • C. Fund investments

• • D. All of the above