Answers 1. B. Management is responsible, and the Board has oversight responsibility. 2. B 3. D. If you answered B, you’re out-of-date. The current FASB rules take a balance sheet approach to deferred taxes, not an income statement ap-proach. 4. E. All of these practices are targeted by the SEC’s earnings management initiative. 5. D 6. B. Current assets are generally assets that will be converted into cash within a year (or one normal business cycle). Fixed assets (equipment, plant) are usually long-term in nature. 7. D. The ratio of current assets to current liabilities is important for the ongo-ing liquidity of the company. Generally, a ratio of 1:1 is considered healthy. 8. A. Understanding these three sections and thinking about the future of the business in terms of the cash flow from operations, investments and fi-nancing are a great way to assess a business. This is a very important part of the financial statement to investors. 9. C,
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