Financial Statements Quiz

What is the purpose of a balance sheet?

• To show a company's financial position at a specific point in time.

• To predict future financial performance

• To analyze customer satisfaction

• To determine employee salaries

Explain the difference between income statement and balance sheet.

• Income statement focuses on performance over time, while balance sheet shows financial position at a point in time.

• Income statement includes cash flow, while balance sheet does not.

• Income statement is prepared annually, while balance sheet is prepared monthly.

• Income statement shows assets and liabilities, while balance sheet shows revenue and expenses.

What are the three main financial statements?

• income statement, balance sheet, cash flow statement

• revenue summary

• equity report

• profit statement

How is the net income calculated on an income statement?

• Total Revenues + Total Expenses = Net Income

• Net Income / Total Revenues = Total Expenses

• Total Expenses - Total Revenues = Net Income

• Total Revenues - Total Expenses = Net Income

What does the cash flow statement show?

• The cash flow statement shows the inflow and outflow of cash in a business over a specific period of time.

• The cash flow statement shows the profit and loss of a business

• The cash flow statement shows the balance sheet of a business

• The cash flow statement shows the revenue and expenses of a business

Define the term 'assets' in financial statements.

• Office supplies

• Employee salaries

• Resources owned by a company with economic value and expected future benefits.

• Debts owed by a company

Why is it important for a company to prepare financial statements?

• To showcase artistic skills

• Preparing financial statements is important for stakeholders to assess a company's financial health, performance, and compliance with legal requirements.

• To confuse competitors

• To test the printer quality

What is the formula for calculating return on investment (ROI)?

• ROI = (Final Value / Initial Investment) * 100

• ROI = (Initial Investment / Final Value) * 100

• ROI = (Final Value - Initial Investment) / Final Value

• ROI = ((Final Value - Initial Investment) / Initial Investment) * 100

How do financial statements help investors make decisions?

• Financial statements are only useful for company employees, not investors

• Financial statements offer crucial data for investors to evaluate a company's financial status and make decisions based on profitability, growth potential, and financial health.

• Financial statements are irrelevant for investors

• Financial statements only provide historical data, not future projections

Explain the concept of 'double-entry accounting'.

• Double-entry accounting requires manual calculations for each transaction.

• Double-entry accounting involves recording transactions only in one account.

• Double-entry accounting is a system where transactions have different effects in the same account.

• Double-entry accounting is a system where every financial transaction has equal and opposite effects in at least two different accounts.