Financial Statements and Metrics

The video tutorial explains the components of an income statement for a company selling widgets, detailing revenue, costs, and profit calculation. It discusses net income, earnings per share, and the relationship between income statements and balance sheets. The tutorial also covers year-end financial changes, equity growth, and return on assets, concluding with a brief mention of future topics.

What is the primary purpose of an income statement?

• To list the company's shareholders

• To calculate the company's tax obligations

• To show the company's assets and liabilities

• To display the company's revenue and expenses over a period

If a company sells 3 million widgets at $1 each, and the cost to produce each widget is $0.30, what is the total cost of goods sold?

• $900,000

• $1,000,000

• $1,200,000

• $1,500,000

What is the net income if a company has a pre-tax income of $500,000 and pays $150,000 in taxes?

• $650,000

• $150,000

• $500,000

• $350,000

How is earnings per share (EPS) calculated?

• Operating profit divided by number of shares

• Total revenue divided by number of shares

• Net income divided by number of shares

• Total assets divided by number of shares

What does the book value per share represent?

• The company's total revenue per share

• The value of the company's assets minus liabilities per share

• The company's net income per share

• The market price of the stock

What is the difference between book value and market value?

• Market value is the same as book value

• Book value is always higher than market value

• Book value includes future earnings, market value does not

• Market value is the price at which assets can be sold, while book value is the accounting value

How do earnings affect a company's equity?

• Earnings only affect the company's liabilities

• Earnings increase the company's equity

• Earnings have no effect on equity

• Earnings decrease the company's equity

What is the role of a balance sheet?

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

• To display the company's revenue and expenses over a period

• To calculate the company's tax obligations

• To list the company's shareholders

What does a return on assets (ROA) indicate?

• The efficiency of a company's use of its assets to generate profit

• The company's market value

• The company's total revenue

• The company's total liabilities

What is the significance of the cash flow statement?

• It reconciles the income statement with the actual cash movements

• It shows the company's assets and liabilities

• It calculates the company's tax obligations

• It lists the company's shareholders