CH02 Finance

What is treasury stock?

Stock the firm has repurchased

A balance sheet shows what a firm owns and how it is financed (T or F)

True

(easiest to hardest) Rank the ease of turning the following assets into cash. 1.Plant and equipment 2.Cash equivalents 3.Inventory 4.Accounts receivable

1. Cash Equivalents 2.Accounts receivable 3.Inventory 4. Plants and Equipment

EBIT stands for

Earnings before interest and taxes

EPS stands for...

Earnings per share

What can balance sheets answer?

How much debt is used to finance a firm What is the total amount of assets the firm owns.

Assets are listed on a balance sheet in which order?

In order of time it would take an ongoing firm to convert them into cash.

What are two classifications of costs used by financial accountants?

Product and Period

What is included in a firm's inventory?

Raw materials Finished goods Work in progress

One of the most important limitations of a ______ _____________ is that it shows only __________________, rather than market value

balance sheet ; cost

On a balance sheet, total assets must always equal total liabilities plus ________.

equity

the activity of making net payments to creditors and owners is called a(n) _____________ activity in the accounting statement of cash flows

financing

_________ refers to the ease in which assets can be turned into ________

liquidity;cash

The accounting equation shows that stockholders' equity equals assets _____ liabilities.

minus

The short run for a firm is the period of time during which

output can vary some costs are fixed

The last claimants to be paid by a firm are the ______

stockholders

Cash flows from operations is calculated by adding depreciation to EBIT and _____________ current taxes.

subtracting

What does a balance sheet reflect about a firm?

Accounting value on a specific date

What is on the left side of a balance sheet?

Assets

A(n) __________ refers to a decline in the value of a company's assets.

write-off

What does a stockholders' equity represent?

A residual claim against firms' assets

A balance sheet reflects a firm's ________ value on a particular date.

accounting

When a customer purchases an item on credit, the purchase amount is recorded in the books of the seller in which account?

accounts receivable