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