Nop - Name Nguyen Thi Thuy Nga Intake 2 CHAPTER 3 QUESTIONS...

Name: Nguyen Thi Thuy Nga
Intake 2
CHAPTER 3
QUESTIONS
3-2/ The report provides these four financial statements:
a/ The balance sheet, which shows what assets the company owns and who
has claims on those assets as of a given date. For example, December 31, 2008
b/ The income statement, which shows the firm’s sales and costs (and thus
profits) during some past period. For example, 2008
c/ The statement of cash flow, which shows how much cash the firm began
the year with, how much cash it ended up with, and what it did to increase or
decrease its cash
d/ The statement of stockholder’s equity, which shows the amount of equity
the stockholders had at the start of the year, the items that increased or decreased
equity, and the equity at the end of the year.
These statements are related to one another, and taken together, they provide an
accounting picture of the firm’s operations and financial position.
3-4/
The balance sheet is a snapshot of the firm’s position at a specific point in time.
Figure 3-1 page 56 shows the layout of a typical balance sheet. Current assets of the
statement shows the assets that the company owns, while current liabilities shows the
firm’s liabilities and stockholder’s equity, which are claims against the firm’s assets.
Assets are divided into two major categories: current assets and fixed, or long term,
assets. Current assets consist of assets that should be converted to cash within one year,
and they include cash and cash equivalents, accounts receivable and inventory. Long term
assets are assets expected to be used for more than one year, they include plant and
equipment in addition to intellectual property such as patents and copyrights. Plant and

equipment is generally reported net of accumulated depreciation. Allied long term assets
consist entirely of net plant and equipment, and we often refer to them as net fixed assets.
The balance sheet represents a snapshot in time, the income statement reports on
operations over a period of time. For example, during 2008 had sales of $3 billion and its
net income was $117.5 million. Income statements are prepared monthly, quarterly and
annually. The quarterly and annual statements are reported to investors, while the
monthly statements are used internally for planning and control purposes and note that