FI. 320 ch. 2

Which of the following statements is/are true about the statement of stockholders' equity for Year T? I. It expands the section of the common equity on the balance sheets, i.e., helps explain the changes from Year T-1 and Year T. II. The retained earnings portion in the income statement for Year T = entry of retained earnings on the Year T balance sheet minus entry of retained earnings on Year T-1 balance sheet. III. If the differences of the entry common stock in the balance sheets from Year T-1 to Year T is positive, it is the net issuance of new stocks in the statement of stockholders' equity

All are correct

Which of the following statements is/are true when making an income statement for Year T? I. Relevant information of the firm's operation in Year T is needed. II. Various costs are deducted before distribution to various stakeholders. III. The bottom of the income statement is net income, which belongs to stockholder (the residual stakeholder). Net income is distributed to shareholders in the form of dividends or returned to the company for future operations in the form of retained earnings. IV. Entries in the income statement are needed for both the firm's statement of stockholders' equity and cash flows.

All are correct

Which of the following items may appear in the statement of cash flows? I. EBIT or EBITDA. II. Increase in accounts payable. III. Increase in inventories.

Only II and III are correct

Which of the following statements is/are true? I. Income statement is a snapshot of the firm's asset and liability. II. Income statement helps track the firm's sales, costs and net income for equity holders. III. The statement of cash flows records the firm's cash flow changes from operating, financing, and investment activities.

Only II and III are correct

Which of the following statements is/are true? I. Net income is part of retained earnings. You can find both items in the income statement. II. Retained earnings is part of net income. You can find both items in the income statement. III. Dividend payment is part of net income. You can find both items in the income statement.

Only II and III are correct

If the additions to property, plant and equipment (net fixed asset T - net fixed asset T-1 + depreciation T) is positive, and this item is the only item for investing activities in Year T, this indicates a net cash outflow for investing activities in Year T. Put differently, investing activities in Year T decrease cash holding positions for the firm, i.e., use cash instead of providing cash.

True

The additions to property, plant, and equipment = net fixed asset T - net fixed asset T-1 + depreciation T

True

The increase in accounts receivable (Accounts receivable T minus Accounts receivable T-1) should be deducted from net income of Year T when calculating the net cash provided by operating activities.

True

The increase in common stock (common stock T minus common stock T-1) is equal to the amount of cash provided through issuance of common stocks in Year T.

True

To balance the cash holding from T-1 to T, you need the net cash provided by operating, financing, and investment activities

True