Chapter 3 Exam Study Objective
CHAPTER 3 EXAM STUDY OBJECTIVE
. The annual report contains four basic financial statements: the income statement, the balance sheet, the cash flow statement, and statement of stockholders' equity. a. True
b. False . The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm's future earnings and dividends, and the riskiness of those cash flows. a. True
b. False . Companies typically provide four basic financial statements: the fixed income statement, the current income statement, the balance sheet, and the cash flow statement. a. True
b. False . On the balance sheet, total assets must always equal the sum of total liabilities plus equity. a. True
b. False . Assets other than cash are expected to produce cash over time, but the amount of cash they eventually produce could be higher or lower than the amounts at which the assets are carried on the books. a. True
b. False
. The amount shown on the December 31, 2012 balance sheet as “retained earnings” is equal to the firm's net income for 2012 minus any dividends it paid. a. True
b. False
. The income statement shows the difference between a firm's income and its costs--i.e., its profits--during a specified period of time. However, not all reported income comes in the form of cash, and reported costs likewise may not be consistent with cash outlays. Therefore, there may be a substantial difference between a firm's reported profits and its actual cash flow for the same period. a. True
b. False
. EBIT stands for earnings before interest and taxes, and it is often called “operating income.” a. True
b. False . EBITDA stands for earnings before interest, taxes, debt, and assets. a. True
b. False . Typically, the statement of stockholders' equity starts with total
. The annual report contains four basic financial statements: the income statement, the balance sheet, the cash flow statement, and statement of stockholders' equity. a. True
b. False . The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm's future earnings and dividends, and the riskiness of those cash flows. a. True
b. False . Companies typically provide four basic financial statements: the fixed income statement, the current income statement, the balance sheet, and the cash flow statement. a. True
b. False . On the balance sheet, total assets must always equal the sum of total liabilities plus equity. a. True
b. False . Assets other than cash are expected to produce cash over time, but the amount of cash they eventually produce could be higher or lower than the amounts at which the assets are carried on the books. a. True
b. False
. The amount shown on the December 31, 2012 balance sheet as “retained earnings” is equal to the firm's net income for 2012 minus any dividends it paid. a. True
b. False
. The income statement shows the difference between a firm's income and its costs--i.e., its profits--during a specified period of time. However, not all reported income comes in the form of cash, and reported costs likewise may not be consistent with cash outlays. Therefore, there may be a substantial difference between a firm's reported profits and its actual cash flow for the same period. a. True
b. False
. EBIT stands for earnings before interest and taxes, and it is often called “operating income.” a. True
b. False . EBITDA stands for earnings before interest, taxes, debt, and assets. a. True
b. False . Typically, the statement of stockholders' equity starts with total