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Questions and Answers
What is a major limitation of the balance sheet mentioned in the text?
What is a major limitation of the balance sheet mentioned in the text?
- It doesn't provide information on current assets.
- It doesn't directly measure the market value of the entity. (correct)
- It doesn't classify assets and liabilities.
- It doesn't include liabilities.
How are current assets defined based on the text?
How are current assets defined based on the text?
- Assets consumed within one year or less, regardless of operating cycle.
- Assets converted to cash within normal operating cycle only.
- Assets converted to cash within one year or normal operating cycle. (correct)
- Assets consumed within one year from the balance sheet date.
Why does Facebook have a market value to book value ratio well above 1 as mentioned in the text?
Why does Facebook have a market value to book value ratio well above 1 as mentioned in the text?
- Because they include all costs in their balance sheet.
- Because they classify assets as noncurrent.
- Because they expense items in the year incurred. (correct)
- Because they estimate receivables accurately.
What is included in equity (net assets) according to the text?
What is included in equity (net assets) according to the text?
Why does a company's book value in the balance sheet not equal its market value?
Why does a company's book value in the balance sheet not equal its market value?
Which factor enhances the usefulness of the balance sheet according to the text?
Which factor enhances the usefulness of the balance sheet according to the text?
How does an increase in the fair value of land owned by a company impact its book value?
How does an increase in the fair value of land owned by a company impact its book value?
Why are aspects like trained employees and loyal customer relationships not recorded as assets in the balance sheet?
Why are aspects like trained employees and loyal customer relationships not recorded as assets in the balance sheet?
What is the primary reason for investors reflecting resources like trained employees and experienced management team in a company's overall market value?
What is the primary reason for investors reflecting resources like trained employees and experienced management team in a company's overall market value?
How does Facebook's annual spending on research and development impact its market value?
How does Facebook's annual spending on research and development impact its market value?
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