FINC 3620 Exam 2 Talitha Smith || A+ Verified Solutions.
Pro forma correct answers "financial statements created by an entrepreneur that attempt to
estimate the future financial results of a company based upon certain identified assumptions"
Income statement correct answers "a summary of the revenue and expenses of a business over a
specified period of time"
Statement of Financial Position correct answers "a summary of the assets, liabilities, and equity
of a business at a specific point in time; also called a balance sheet"
Statement of Cash flows correct answers "a summary of the cash receipts and cash expenditures
of a business over a specified period of time"
Audited Financial Statements correct answers "financial statements that have been successfully
formally examined by an outside, independent auditor; examination includes an in-depth
investigation of a business's accounting policies and practices, accounting records, and internal
financial statements, with the goal of providing reasonable assurance that the final financial
statements shared with those outside the company fairly present the financial position,
performance, continued viability, and risks associated the company under audit "
Reviewed Financial Statement correct answers "financial statements that have been subjected to
inquiry and analytical procedures by an outside accountant who expresses limited assurance that
the financial statements fairly present the financial position, performance, continued viability,
and risks associated with the company under review"
Compiled Financial Statements correct answers "financial statements that have been prepared by
an accountant outside a company based on the data provided by that company; an accountant
who prepares compiled financial statements does so without providing any of the assurances
associated with an audit or a review "
Accounting Information System correct answers "a usually software-based system that provides
the data needed to effectively operate a business and prepare that business's period- or year-end
financial statements, tax documents (i.e., W-2s and Form 1099s), and tax filings"
Sales correct answers "the monies received as a result of a business selling its products and
services; also called revenue and sales revenue"
Returns and Allowances correct answers "refunded sales dollars; also called sales returns and
allowances or simply sales allowances or returns"
Net sales correct answers "sales minus returns and allowances; also called net revenue"
COGS correct answers "The amount it costs a company to create, build, or purchase the product
it sells; the cost of inventory—once a company has sold that inventory—becomes cost of goods
sold; often referred to as COGS"
, Cost of sales correct answers "the direct costs associated with delivering services to the clients of
service-based businesses; also called cost of revenue and cost of services"
Gross Profit correct answers "net sales (or sales, if there is no net sales amount) minus cost of
goods sold, cost of sales, cost of revenue, or cost of services"
Operating Expenses correct answers "all of an enterprise's expenses—except interest and income
taxes—that are not included in cost of goods sold, cost of sales, cost of revenue, or cost of
services"
Depreciation Expense correct answers "An expense amount that represents the wearing out of
certain of a business's fixed assets over time, valued in dollars; also called depreciation"
Operating Income correct answers "gross profit minus operating expenses; operating income
represents the earnings from business operations—before interest and income taxes are
considered—and is generally viewed as a key indicator of the relative success or failure of a
business model"
Interest Expense correct answers "the amount of interest incurred by a business related to its
liabilities and debt; also called interest"
Provision for income taxes correct answers "the amount of income taxes incurred by a C
corporation or an entity taxed as a C corporation, related generally to the net income it generates;
also called income tax expense"
Net income correct answers "operating income minus interest expense for most sole
proprietorships, partnerships, LLCs, and S corporations; for a C corporation or an entity taxed as
a C corporation, net income equals operating income minus interest expense and minus the
provision for income taxes; also called profit and net profit"
Net income before taxes correct answers "a subtotal unique to the income statement of a C
corporation or entity taxed as a C corporation that usually appears immediately before the line
for the provision for income taxes"
EPS of a common stock correct answers "an element sometimes included on the income
statement of a C corporation (but not on the income statement of an entity taxed as a C
corporation) calculated by dividing net income by the number of the corporation's outstanding
shares of common stock"
Asset correct answers "an itemofvalue owned by a business"
Current Asset correct answers "an item of value that's either cash or an asset that will likely be
converted into cash within the next 12 months"
Pro forma correct answers "financial statements created by an entrepreneur that attempt to
estimate the future financial results of a company based upon certain identified assumptions"
Income statement correct answers "a summary of the revenue and expenses of a business over a
specified period of time"
Statement of Financial Position correct answers "a summary of the assets, liabilities, and equity
of a business at a specific point in time; also called a balance sheet"
Statement of Cash flows correct answers "a summary of the cash receipts and cash expenditures
of a business over a specified period of time"
Audited Financial Statements correct answers "financial statements that have been successfully
formally examined by an outside, independent auditor; examination includes an in-depth
investigation of a business's accounting policies and practices, accounting records, and internal
financial statements, with the goal of providing reasonable assurance that the final financial
statements shared with those outside the company fairly present the financial position,
performance, continued viability, and risks associated the company under audit "
Reviewed Financial Statement correct answers "financial statements that have been subjected to
inquiry and analytical procedures by an outside accountant who expresses limited assurance that
the financial statements fairly present the financial position, performance, continued viability,
and risks associated with the company under review"
Compiled Financial Statements correct answers "financial statements that have been prepared by
an accountant outside a company based on the data provided by that company; an accountant
who prepares compiled financial statements does so without providing any of the assurances
associated with an audit or a review "
Accounting Information System correct answers "a usually software-based system that provides
the data needed to effectively operate a business and prepare that business's period- or year-end
financial statements, tax documents (i.e., W-2s and Form 1099s), and tax filings"
Sales correct answers "the monies received as a result of a business selling its products and
services; also called revenue and sales revenue"
Returns and Allowances correct answers "refunded sales dollars; also called sales returns and
allowances or simply sales allowances or returns"
Net sales correct answers "sales minus returns and allowances; also called net revenue"
COGS correct answers "The amount it costs a company to create, build, or purchase the product
it sells; the cost of inventory—once a company has sold that inventory—becomes cost of goods
sold; often referred to as COGS"
, Cost of sales correct answers "the direct costs associated with delivering services to the clients of
service-based businesses; also called cost of revenue and cost of services"
Gross Profit correct answers "net sales (or sales, if there is no net sales amount) minus cost of
goods sold, cost of sales, cost of revenue, or cost of services"
Operating Expenses correct answers "all of an enterprise's expenses—except interest and income
taxes—that are not included in cost of goods sold, cost of sales, cost of revenue, or cost of
services"
Depreciation Expense correct answers "An expense amount that represents the wearing out of
certain of a business's fixed assets over time, valued in dollars; also called depreciation"
Operating Income correct answers "gross profit minus operating expenses; operating income
represents the earnings from business operations—before interest and income taxes are
considered—and is generally viewed as a key indicator of the relative success or failure of a
business model"
Interest Expense correct answers "the amount of interest incurred by a business related to its
liabilities and debt; also called interest"
Provision for income taxes correct answers "the amount of income taxes incurred by a C
corporation or an entity taxed as a C corporation, related generally to the net income it generates;
also called income tax expense"
Net income correct answers "operating income minus interest expense for most sole
proprietorships, partnerships, LLCs, and S corporations; for a C corporation or an entity taxed as
a C corporation, net income equals operating income minus interest expense and minus the
provision for income taxes; also called profit and net profit"
Net income before taxes correct answers "a subtotal unique to the income statement of a C
corporation or entity taxed as a C corporation that usually appears immediately before the line
for the provision for income taxes"
EPS of a common stock correct answers "an element sometimes included on the income
statement of a C corporation (but not on the income statement of an entity taxed as a C
corporation) calculated by dividing net income by the number of the corporation's outstanding
shares of common stock"
Asset correct answers "an itemofvalue owned by a business"
Current Asset correct answers "an item of value that's either cash or an asset that will likely be
converted into cash within the next 12 months"
