Chapter 2--Analysis of Fina - Copy

Chapter 2--Analysis of Fina - Copy - Chapter 2-Analysis of...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 2--Analysis of Financial Statements Chapter 2--Analysis of Financial Statements Student: ___________________________________________________________________________ 1. The income statement measures the flow of funds into (i.e. revenue) and out of (i.e. expenses) the firm over a certain time period. It is always based on accounting data. True False 2. The balance sheet is a financial statement measuring the flow of funds into and out of various accounts over time while the income statement measures the progress of the firm at a point in time. True False 3. An increase in an asset account is a source of cash, whereas an increase in a liability account is a use of cash. True False 4. Depreciation, as shown on the income statement, is regarded as a use of cash because it is an expense. True False 5. When a firm pays off a loan using cash, the source of funds is the decrease in the asset account, cash, while the use of funds involves a decrease in a liability account, debt. True False 6. Non-cash assets are expected to produce cash over time but the amount of cash they eventually produce could be higher or lower than the values at which the assets are carried on the books. True False 7. Taxes, payment patterns, and reporting considerations, as well as credit sales and non-cash costs, are reasons why operating cash flows can differ from accounting profits. True False
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
analyze the financial position and strength of a firm. True False 9. The current ratio and inventory turnover ratio measure the liquidity of a firm. The current ratio measures the relation of a firm's current assets to its current liabilities and the inventory turnover ratio measures how rapidly a firm turns its inventory back into a "quick" asset or cash. True False 10. If a firm has high current and quick ratios, this always is a good indication that a firm is managing its liquidity position well. True False 11. A decline in the inventory turnover ratio suggests that the firm's liquidity position is improving. True False 12. The degree to which the managers of a firm attempt to magnify the returns to owners' capital through the use of financial leverage is captured in debt management ratios. True False 13. Profitability ratios show the combined effects of liquidity, asset management, and debt management on operations. True False 14. Determining whether a firm's financial position is improving or deteriorating requires analysis of more than one set of financial statements. Trend analysis is one method of measuring a firm's performance over time. True False
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 35

Chapter 2--Analysis of Fina - Copy - Chapter 2-Analysis of...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online