Adventis FMC Level 1 Questions and Answers Rated A+

Adventis FMC Level 1 Questions and Answers Rated A+ financial statement communicates what? - financial condition - results of operations - various other activities of an organization how board of directors use financial data... - hold management accountable - make board-level decisions about corporate strategy how company management uses financial data... - measure performance - make strategic, operating and financial decisions how creditors use financial data... - measure creditworthiness - liquidity - bankruptcy risk how investors use financial data... make decisions on buying/selling equity investments how acquirers use financial data... - determine valuation - make investment decisions how regulators use financial data... determine whether company is operating according to regulations/law what does the income statement present? results of operations over a period of time what is the purpose of the income statement? to show whether the company made or lost money during the period reported what does the income statement indicate? how revenues are translated into net income through subtracting expenses revenue (sales) amount charged for the delivery of goods or services cost of sales (cogs) - direct cost of producing revenue - Ex: raw materials, direct wages, etc. gross profit - revenue - cogs - indicates how efficiently labor and materials are used in the production process operating expenses - all other expenses required to run a business - Ex: management salaries, marketing, travel, etc. operating income (EBIT) - revenue - cogs - operating expenses - indicates a company's earning power from ongoing operations non-operating expenses - expenses not related to regular business of the company - Ex: interest expense, restructuring expense, etc. corporate taxes local and federal income taxes the company incurs net income (net earnings) - revenue - cogs - operating expenses - non-operating expenses - taxes - indicates increase in shareholders' value resulting from operations what does the balance sheet show? an organiz