Balance Sheet Quiz - Financial Principles

Assets equal the sum of liabilities and equity.

The use of debt to increase returns on investment.

A financial statement that shows a company's revenues and expenses over a period of time.

A financial statement that shows the movement of cash both into and out of a company.

Financial ratios used to assess a company's ability to pay its interest obligations.

Financial ratios showing the extent of debt financing used by a company.

Resources owned by a company.

Obligations of a company to others.

The Balance Sheet Identity shows that a company's resources (assets) are funded by either debt (liabilities) or owner investment (equity). It highlights the fundamental relationship between these three core financial components.

Assets are resources owned by a company that are expected to provide future economic benefits.

Liabilities are obligations of a company to outsiders, typically representing money owed to creditors.

Stockholders' equity represents the owners' stake in the company, reflecting their investments and accumulated profits.

A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

The difference between a company's assets and liabilities. Represents the value of ownership.

It reveals a company's financial position at a specific point in time by summarizing its assets, liabilities, and equity.

A Balance sheet shows what a company owns (assets), what it owes (liabilities), and the value of ownership (equity).

The Balance Sheet is crucial for understanding a company's financial health, making investment decisions, and assessing its ability to meet its obligations.

The cash flows generated from the normal day-to-day operations of a business, such as sales and purchases of goods.

The cash flows related to buying and selling long-term assets, such as property, plant, and equipment.

The cash flows related to raising capital (debt or equity) and repaying loans.

It provides crucial information about a company's financial health, highlighting its ability to generate and utilize cash.

Operating Activities, Investing Activities, and Financing Activities.

It reveals how much cash a company generated during a period and where that cash was allocated.

The Income Statement shows profitability based on revenue and expenses, while the Statement of Cash Flows focuses on actual cash inflows and outflows.

Assets that lack physical form but have value, like brand names, patents, and customer relationships. Acquired through acquisitions and can be amortized or impaired.

The gradual reduction of the value of intangible assets over time, similar to depreciation for physical assets. It's a non-cash expense.

A sudden and significant decrease in the value of an intangible asset.

Assets not directly used in operations, including property held for sale, investments in long-term securities, and start-up costs.

The sum of all assets listed on the balance sheet.

Short-term obligations due within a year, like accounts payable and accrued expenses.

Obligations due over a period longer than a year, such as bonds and long-term loans.

The cost of using up an asset over time (like a machine). It's an expense that is recorded on the income statement, reflecting the wear and tear on assets.

Earnings Before Interest and Taxes. A measure of a company's operating profit before interest and taxes are deducted.

A company's profit before taxes are deducted.

The percentage of a company's pretax income that is paid in taxes.

How a change in expenses or revenue affects a company's net income.

The amount of cash a company has on hand at a specific point in time.

How a change in expenses or revenue affects the amount of cash a company has on hand.

Depreciation is a non-cash expense, meaning it reduces income but doesn't directly involve cash outlays. It impacts cash flow through its effect on taxes.