FIN 301- Chapter 3 Exam Questions And
Complete Answers
Annual Report - answer -A report issued annually by a corporation to its stockholders
-Contains basic financial statements as well as management's analysis of the firm's past
operations and future prospects
4 Basic Financial Statements - answer 1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows
4. Statement of stockholders' equity
Balance Sheet - answer -Assets = Liabilities + Owners' Equity
-statement of financial position at specific point in time
-shows what assets the company owns and who has claims on those assets as of a given
date (end of month)
-left side: current assets (cash, AR, inventory), long-term/fixed assets (net plant &
equipment), and total assets
-Right side: current liabilities (accrued wages/taxes, AP, NP), long term debt,
stockholders' equity (common stock & RE), total liabilities / stockholders' equity)
Income Statement - answer -shows the firm's sales and costs (thus profit) during some
past period
-report summarizing a firm's revenues, expenses, and profits during a reporting period,
generally a quarter or a year
Operating Income - answer -earnings from operations before interest and taxes (EBIT)
-EBIT=sales revenues - operating costs
Depreciation - answer -the charge to reflect the cost of assets depleted in the
production process
-tangible assets
-not a cash outlay
Amortization - answer -a noncash charge similar to depreciation except that it
Complete Answers
Annual Report - answer -A report issued annually by a corporation to its stockholders
-Contains basic financial statements as well as management's analysis of the firm's past
operations and future prospects
4 Basic Financial Statements - answer 1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows
4. Statement of stockholders' equity
Balance Sheet - answer -Assets = Liabilities + Owners' Equity
-statement of financial position at specific point in time
-shows what assets the company owns and who has claims on those assets as of a given
date (end of month)
-left side: current assets (cash, AR, inventory), long-term/fixed assets (net plant &
equipment), and total assets
-Right side: current liabilities (accrued wages/taxes, AP, NP), long term debt,
stockholders' equity (common stock & RE), total liabilities / stockholders' equity)
Income Statement - answer -shows the firm's sales and costs (thus profit) during some
past period
-report summarizing a firm's revenues, expenses, and profits during a reporting period,
generally a quarter or a year
Operating Income - answer -earnings from operations before interest and taxes (EBIT)
-EBIT=sales revenues - operating costs
Depreciation - answer -the charge to reflect the cost of assets depleted in the
production process
-tangible assets
-not a cash outlay
Amortization - answer -a noncash charge similar to depreciation except that it
