19 Review Questions

Chapter 2 Review Questions

1. What is the difference between gross profit and net income?

 

2. If a classified balance sheet has total assets of $900,000 and total owner’s equity of $350,000, what must the company’s total liabilities be?

 

3. What key element of the income statement flows through to the balance sheet?

 

4. What key columns are commonly found on the statement of owner’s equity?

 

5. Ted’s firm reported net income for the current period of $65,750. Is it safe to assume that because Ted’s firm reported such a large net income, it has plenty of cash to fund its operations? Why or why not?

 

6. What useful insights does free cash flow (FCF) provide in financial analysis?

 

7. Describe how common-size statements are useful.

 

8. What is the difference between a calendar year and a fiscal year?

 

Attribution:

This chapter is from “Principles of Finance”  https://openstax.org/books/principles-finance/pages/1-why-it-matters by Dahlquist and Knight. This book is licensed under the CC-BY 4.0 license. 2022 OpenStax.

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PPSC FIN 2010 Principles of Finance by Cristal Brietbeil and Eric Schroeder is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License, except where otherwise noted.

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