Chapter 10

________ is the cash that has been invested in a firm by its owners. a. Total assets b. Owner's equity c. Retained earning d. Common stock

Common stock

The value of a depreciable asset a. Increases over time b. Is constant over time c. Increases with each use of the asset d. Decreases over time

decreases over time

To convert the company's income statement from accrual basis to cash basis, we take two steps: 1) add back ________ to net profits and 2) subtract any uncollected sales and payments for inventory. a. cash flows b. total assets c. retained earnings d. depreciation

depreciation

Fixed assets include all of the following EXCEPT: a. machinery. b. land. c. trucks. d. inventory

inventory

the more debt and less equity they use, the more owners' return on equity will be. This is called ________ . a. return on equity b. profit margins c. financial leverage d. total asset turnover

financial leverage

Total asset turnover equal sales divided by: a. total assets. b. total debt. c. debt ratio. d. operating profits.

total assets

Having positive net profits in an income statement does not necessarily mean that a firm has generated positive cash flows. a. True b. False

true

Total assets less outstanding debt must always equal ownership equity. a. True b. False

true

Operating expenses consist of all of the following EXCEPT: a. depreciation. b. marketing and selling expenses. c. cost per number of item sold. d. general and administrative expenses.

cost per number of item sold

The amount of the business owner's initial investment, owner's later investment in the business, and retained earnings comprise

owners equity capital