Corporate Finance 4th Edition By Berk - Test Bank

Corporate Finance, 4e (Berk / DeMarzo)

Chapter 2   Introduction to Financial Statement Analysis

2.1   Firms' Disclosure of Financial Information

1) U.S. public companies are required to file their annual financial statements with the U.S. Securities and Exchange Commission on which form?

A) 10-A

B) 10-K

C) 10-Q

D) 10-SEC

Answer:  B

Diff: 1

Section:  2.1 Firms' Disclosure of Financial Information

Skill:  Definition

2) Which of the following is NOT a financial statement that every public company is required to produce?

A) Income Statement

B) Statement of Sources and Uses of Cash

C) Balance Sheet

D) Statement of Stockholders' Equity

Answer:  B

Diff: 2

Section:  2.1 Firms' Disclosure of Financial Information

Skill:  Conceptual

3) The third party who checks annual financial statements to ensure that they are prepared according to GAAP and verifies that the information reported is reliable is the:

A) NYSE Enforcement Board.

B) Accounting Standards Board.

C) Securities and Exchange Commission (SEC).

D) auditor.

Answer:  D

Diff: 1

Section:  2.1 Firms' Disclosure of Financial Information

Skill:  Definition

4) What is the role of an auditor in financial statement analysis?

Answer:  Key points:

1. To ensure that the annual financial statements are prepared accurately.

2. To ensure that the annual financial statements are prepared according to GAAP.

3. To verify that the information used in preparing the annual financial statements is reliable.

Diff: 2

Section:  2.1 Firms' Disclosure of Financial Information

Skill:  Conceptual

5) What are the four financial statements that all public companies must produce?

Answer: 

1. Balance Sheet

2. Income Statement

3. Statement of Cash Flows

4. Statement of Stockholder's Equity

Diff: 2

Section:  2.1 Firms' Disclosure of Financial Information

Skill:  Conceptual

2.2   The Balance Sheet

1) Which of the following balance sheet equations is INCORRECT?

A) Assets - Liabilities = Shareholders' Equity

B) Assets = Liabilities + Shareholders' Equity

C) Assets - Current Liabilities = Long Term Liabilities

D) Assets - Current Liabilities = Long Term Liabilities + Shareholders' Equity

Answer:  C

Diff: 2

Section:  2.2 The Balance Sheet

Skill:  Conceptual

2) Cash is a:

A) long-term asset.

B) current asset.

C) current liability.

D) long-term liability.

Answer:  B

Diff: 1

Section:  2.2 The Balance Sheet

Skill:  Definition

3) Accounts payable is a:

A) long-term liability.

B) current asset.

C) long-term asset.

D) current liability.

Answer:  D

Diff: 1

Section:  2.2 The Balance Sheet

Skill:  Definition