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Exam 10: Financial Statements

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Question 41

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In order to determine the cash flows from day-to-day operations the firm must convert the company's income statement from an accrual basis to a cash basis.

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Question 42

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The debt ratio is determined by dividing the firm's total debt by the total _____.

A) income
B) operating profits
C) assets
D) liabilities

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Question 43

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You Make the Call-Situation 2 At the beginning of 2005, Mary Abrahams purchased a small business, the Turpen Company, whose income statement and balance sheets are shown below. The firm has been profitable, but Abrahams has been disappointed by the lack of cash flows. She had hoped to have about $10,000 a year available for personal living expenses. However, there never seems to be much cash available for purposes other than business needs. Abrahams has asked you to examine the financial statements and explain why, although they show profits, she does not have any discretionary cash for personal needs. She observed, "I thought that I could take the profits and add depreciation to find out how much cash I was generating. However, that doesn't seem to be the case. What's happening?"

The net income does not measure the return on the firm's total assets.

The income statement shows a firm's financial position on a specific date.

A business loan for 9 months would be best described as a(n)

An example of a current asset is

List the four primary ways an entrepreneur's decisions play out when it comes to evaluating a firm's financial performance.

To determine the debt ratio, the total debt is divided by the total assets.

The value of a depreciable asset

Cash flows that investors either provide to or receive from the business are called cash flows from owners' equity.

Other assets would include all of the following except

As Krista explained to her daughters Ashley and Cameron, the report that provides a picture of the firm's assets and its sources of financing at a point in time is the

Current assets include all of the following EXCEPT

The best financial ratio to determine a company's ability to pay debt as it comes due is the debt ratio.

Jan Woodring is considering investing in a business. To see the firm's financial position over a period of time, she should look at its balance sheet.

The _____ shows all cash receipts and payments involved in operating the business and managing its financial activities.

The major difference between cash-basis accounting and accrual-basis accounting lies in when the firm recognizes revenue and profits.