Wall Street Prep Exam Questions And
Verified Answers
\Q\.Assets - ANSWERS✔-resources a company uses to operate its
business
includes cash, A/R, PP&E
\Q\.Liabilities - ANSWERS✔-represents the company's contractual
obligations and includes A/P, debt, accrued expenses
\Q\.Shareholder's equity - ANSWERS✔-is the residual
the value of the business available to the owners (shareholders) after
debts have been paid off
\Q\.Income statement - ANSWERS✔-illustrates the profitability of the
company over a specified period of time
broad sense: shows revenue-expenses
,\Q\.Balance sheet - ANSWERS✔-snapshot of the company economic
resources and funding for those resources at a given point in time (A = L
+ SE)
\Q\.Revenue - ANSWERS✔-"top-line"
represents the sale of goods and services
it is recorded when earned (even though cash might not have been
received at the time of transaction)
\Q\.Expenses - ANSWERS✔-netted against revenue to arrive at net
income
COGS (directly associate with good production), SG&A (indirectly
associated with production), interest expense (expense related to
paying debt holders periodic payments), taxes, depreciation expense
(non-cash expense accounting for the use of PP&E, often imbedded
within COGS and SG&A)
\Q\.Net income - ANSWERS✔-"bottom-line"
revenue-expenses
, the profitability available to common shareholder's after debt payments
have been made (interest expense)
\Q\.EPS (earnings per share) - ANSWERS✔-portion of a company's profit
allocated to each outstanding share of common stock
EPS = (net income - dividends on preferred stock)/weighted average
shares outstanding
\Q\.Cash flow statement - ANSWERS✔-While cash is not necessarily
received when a sale occurs, the income statement still records the
sale. As a result, the income statement captures all the economic
transactions of the business.
The cash flow statement is needed because the income statement uses
what is called accrual accounting. In accrual accounting, revenues are
recorded when earned regardless of when cash is received (revenue
includes sales using cash and made on credit A/R)
Since we also want to have a clear understanding of the cash position
of a company, we need the statement of cash flows to reconcile the
income statement to cash inflows and outflows.
Verified Answers
\Q\.Assets - ANSWERS✔-resources a company uses to operate its
business
includes cash, A/R, PP&E
\Q\.Liabilities - ANSWERS✔-represents the company's contractual
obligations and includes A/P, debt, accrued expenses
\Q\.Shareholder's equity - ANSWERS✔-is the residual
the value of the business available to the owners (shareholders) after
debts have been paid off
\Q\.Income statement - ANSWERS✔-illustrates the profitability of the
company over a specified period of time
broad sense: shows revenue-expenses
,\Q\.Balance sheet - ANSWERS✔-snapshot of the company economic
resources and funding for those resources at a given point in time (A = L
+ SE)
\Q\.Revenue - ANSWERS✔-"top-line"
represents the sale of goods and services
it is recorded when earned (even though cash might not have been
received at the time of transaction)
\Q\.Expenses - ANSWERS✔-netted against revenue to arrive at net
income
COGS (directly associate with good production), SG&A (indirectly
associated with production), interest expense (expense related to
paying debt holders periodic payments), taxes, depreciation expense
(non-cash expense accounting for the use of PP&E, often imbedded
within COGS and SG&A)
\Q\.Net income - ANSWERS✔-"bottom-line"
revenue-expenses
, the profitability available to common shareholder's after debt payments
have been made (interest expense)
\Q\.EPS (earnings per share) - ANSWERS✔-portion of a company's profit
allocated to each outstanding share of common stock
EPS = (net income - dividends on preferred stock)/weighted average
shares outstanding
\Q\.Cash flow statement - ANSWERS✔-While cash is not necessarily
received when a sale occurs, the income statement still records the
sale. As a result, the income statement captures all the economic
transactions of the business.
The cash flow statement is needed because the income statement uses
what is called accrual accounting. In accrual accounting, revenues are
recorded when earned regardless of when cash is received (revenue
includes sales using cash and made on credit A/R)
Since we also want to have a clear understanding of the cash position
of a company, we need the statement of cash flows to reconcile the
income statement to cash inflows and outflows.
