1) Which of the statements below is FALSE?
A) The purpose of studying financial statements is to understand those portions of the statements that have relevance for financial decision making.
B) We need to understand how to interpret and use the information presented in financial statements to form a picture of the financial profile of the firm.
C) Accounting, it has been said, looks back to where a company has been - somewhat like looking through a rear view mirror.
D) Accounting and finance view the numbers in the same way.
2) Net income is ________.
A) the accounting profit from the operations of the company during the period
B) cash flow
C) the accounting profit from the non-operating assets of the company during the period
D) always the dividends paid shareholders
3) Which of the statements below is FALSE?
A) The cash account is much like your individual checkbook, because it tells you how much money you currently have for paying bills or spending on new items.
B) Long-term assets are accounts that will normally be turned into cash over the course of the operating or business cycle of the firm, and current liabilities are the accounts that will come due for payment over the operating or business cycle.
C) The long-term capital asset accounts of the balance sheet represent the capital investment of the company and reflect assets that the company owns and that provide the basis for producing goods and services for sale.
D) The Plant, Property and Equipment account is straightforward in its description, yet it really contains two pieces: the original value (purchase price) of the equipment and the accumulated depreciation.
4) Free cash flow is the ________.
A) cash flow from assets.
B) the remaining cash free to distribute to creditors and owners of the firm
C) cash that a a company generates to to operate the company
D) All of the above
5) The SEC has a site named EDGAR that ________.
A) provides, at a cost, on-line access to a company's financial reports
B) offers investors free advice on what stocks to pick
C) provides an on-line tutorial on how to understand the government's role in affecting stock prices
D) provides an on-line tutorial that will help new viewers find a company and its financial statements