02-Chapter - Financial Statements

1. What are the three main financial statements prepared by a company?
a) Income Statement, Balance Sheet, Cash Flow Statement

b) Income Statement, Statement of Retained Earnings, Trial Balance
c) Balance Sheet, Statement of Cash Flows, Statement of Equity
d) Profit and Loss Statement, Balance Sheet, Statement of Operations
2. Which financial statement reports a company's revenues and expenses over a specific
period?
a) Balance Sheet
b) Income Statement
c) Cash Flow Statement
d) Statement of Stockholders' Equity
3. The Balance Sheet reports a company's financial position at a specific point in time,
usually:
a) The beginning of the fiscal year
b) The end of the fiscal year
c) The middle of the fiscal year
d) The most recent quarterly report
4. What is the primary purpose of the Income Statement?

a) To show the company's financial position
b) To report the company's cash flow
c) To report the company's revenues and expenses
d) To report changes in stockholder's equity
5. Which financial statement provides information about a company's cash receipts and
cash payments during a specific period?
a) Income Statement
b) Balance Sheet
6. Which of the following is not typically found on a Balance Sheet?

a) Accounts Receivable
b) Retained Earnings
c) Inventory
d) Operating Income
7. What is the formula for calculating net income on the Income Statement?
a) Total Revenue - Total Expenses
b) Total Assets - Total Liabilities
c) Total Liabilities - Total Equity
d) Total Cash Flow from Operations
8. Which financial statement would you consult to find information about a company's
debt obligations?
a) Income Statement
b) Cash Flow Statement
c) Statement of Stockholders' Equity
d) Balance Sheet
9. Which financial statement is sometimes called the "statement of cash flows"?

a) Income Statement
b) Balance Sheet
10. What is the main purpose of the Statement of Cash Flows?

a) To provide a summary of revenues and expenses
b) To report the company's financial position
c) To show changes in equity accounts
d) To explain the cash changes during a period
11. Which of the following is not a category on the Statement of Cash Flows?
a) Operating Activities
b) Financing Activities
c) Investing Activities
d) Equity Activities
12. What does the term "retained earnings" represent on the Balance Sheet?
a) Total assets of the company
b) Accumulated net income over time
c) The current market value of the company's stock
d) Total liabilities of the company
13. What is the primary purpose of the notes to the financial statements?
a) To provide additional explanations and details about the financial statements
b) To report the company's cash flows
c) To summarize the income statement
d) To disclose information about stockholders' personal finances
14. Which financial statement would you consult to determine a company's liquidity?
a) Income Statement
b) Balance Sheet
c) Statement of Stockholders' Equity
d) Cash Flow Statement
15. Which financial statement helps in assessing a company's profitability?

a) Income Statement
b) Balance Sheet
c) Statement of Cash Flows
16. What does a negative net income on the Income Statement indicate?
a) The company is profitable
b) The company has no debt
c) The company has incurred losses
d) The company has a strong cash position
17. Which financial statement includes all accounts and their balances at a specific point
in time?
a) Income Statement
b) Cash Flow Statement
c) Balance Sheet
18. Which financial statement would show the purchase of a new building by a company?
a) Income Statement
b) Balance Sheet
19. What does the "bottom line" of the Income Statement represent?
a) Total assets of the company
b) Total revenues of the company
c) Net income or profit of the company
d) Total liabilities of the company
20. The Statement of Cash Flows reports cash transactions in three main categories. Which
of these is not one of the categories?
a) Operating Activities
b) Financing Activities
c) Investing Activities
d) Equity Activities
21. Which financial statement would be most helpful for assessing a company's ability to
pay its short-term obligations?
a) Income Statement
b) Balance Sheet

02-Chapter - Financial Statements

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1. What are the three main financial statements prepared by a company?

a) Income Statement, Balance Sheet, Cash Flow Statement

4. What is the primary purpose of the Income Statement?

6. Which of the following is not typically found on a Balance Sheet?

9. Which financial statement is sometimes called the "statement of cash flows"?

10. What is the main purpose of the Statement of Cash Flows?

15. Which financial statement helps in assessing a company's profitability?

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