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Exam 8: The Balance Sheet: Content, Use and Analysis

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Question 31

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Jason's Soccer Shop had net income of $600 000, interest expense of $40 000, average owner's equity of $125 000, and average total assets of $250 000. a. Determine Jason's return on assets. b. Determine Jason's return on owner's equity.

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Question 32

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The accounting equation is assets = ____________________ + owner's equity.

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Question 33

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Economic resources are to ______, as claims on economic resources are to liabilities and owner's equity.

A ____________________ balance sheet shows subtotals for assets, liabilities and owner's equity in related groupings.

The current ratio is current assets divided by:

The return on total assets assesses:

Why do internal and external users need the information contained in both the income statement and the balance sheet?

Bill's Crafts reported $36 500 for current assets and $10 500 for other assets. The business also had $15 000 of current liabilities. Quick assets totalled $9000, and long-term liabilities totalled $25 000. a. What was Bill's current ratio? b. What was Bill's quick ratio? c. What was Bill's debt ratio? d. What was Bill's owner's equity?

In relation to 'inventory turnover', the general rule is:

What is operating capability? What are two commonly used measures of operating capability?

In order to be classified as an asset the resource must provide future benefit.

Which of the following would NOT be classified as a non-current asset?

Liquidity refers to a firm's ability to use assets to pay off owners under owner's equity.

The ____________ __________________ ______________ measures how efficiently a business collects cash from its credit customers.

____________________ are the external parties to whom the business owes economic obligations.

Example 8.1 The information below pertains to the following questions. ABC reported $356 500 for current assets and $100 500 for other assets. It also had $175 000 of current liabilities. ABC's quick assets totalled $222 000, and its long-term liabilities totalled $105 000. -Refer to Example 8.1. Determine ABC's current ratio.

Which of the following items is NOT reported on the balance sheet as an asset?

The higher a business' debt ratio, the lower its:

What are non-current liabilities? Provide three examples.

Many significant business questions can be answered by analysing a business' income statement and balance sheet together.