4.2 Financial Statement Basics Exercises1

4.2 Financial Statement Basics Exercises1 - The BASICS of...

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The BASICS of FINANCIAL STATEMENTS For Agricultural Producers EXERCISES Authors: James McGrann Francisco Abelló Doug Richardson Christy Waggoner Department of Agricultural Economics Texas Cooperative Extension May 19, 2003
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The Basics of Financial Statements Exercises Instructions This section contains a series of questions and exercises used to gain a better understanding of the basic concepts behind financial statements. The questions and exercises addressed in this section focus on the four main financial statements: (1) Balance Sheet; (2) Income Statement; (3) Statement of Cash Flows; (4) Statement of Owner’s Equity. Each of these statements combine the tools that can be used to evaluate the performance and provide other useful information to better guide decision making in a farm or ranch business. The first set of exercises is a list of multiple choice and fill in the blank questions that help identify the main components of the four different financial statements. These questions should also allow the user to understand what the differences and similarities are between each of the statements and how this can serve as a basis for communication about the performance of a business. The second set of exercises allow the user to piece together an actual set of financial statements by using the information provided from an example ranch business. The West Texas Ranch, in this case, has a list of accounts associated with each of the four main financial statements. It is required that the user places each account into its proper classification within each financial statement. The last page of this exercise contains the information necessary to calculate the performance ratios of the business. The basic goal of this exercise is to be able to identify proper placement of each of the accounts associated with their respective financial statements. If done properly, the numbers used in calculating the financial ratios should match up with some of the ones generated from the financial statements.
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Multiple Choice and Fill in the Blank Questions 1) Complete the following sentences. a) What the business has: . b) How much the business owes: ________. c) What the business is worth: _________. 2) Circle each of the following equations that are correct. (A = Assets, L = Liabilities, E = Equity) a) E = A – L b) A = E + L c) A = E – L d) E = A + L e) L = A – E Table 1. 3) In the table above, mark which of the accounts are assets or liabilities, and if they are current or non-current. 4) How are assets displayed in the asset section of the balance sheet? a) Ascending order of liquidity b) Descending order of amount Assets Liabilities Current Non-Current Accrued Expenses Long Term Investments. Accrued Interest - Non Real Estate Loans and Notes
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4.2 Financial Statement Basics Exercises1 - The BASICS of...

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