Exam (elaborations)
Chapter 3 Financial Statements and Ratio Analysis
- Course
- Institution
Principles of Managerial Finance 8th Edition by Chad J. Zutter-Test Bank
[Show more]
Seller
Follow
premiumbiz379
Reviews received
Content preview
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart)Chapter 3 Financial Statements and Ratio Analysis
3.1 The stockholder's report
1) The Financial Accounting Standards Board (FASB) is the federal regulatory body that
governs the sale and listing of securities.
Answer: FALSE
Diff: 1
Topic: The Stockholders' Report
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
2) GAAP is the accounting profession's rule-setting body.
Answer: FALSE
Diff: 1
Topic: The Stockholders' Report
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
3) Generally accepted accounting principles are authorized by the Financial Accounting
Standards Board (FASB).
Answer: TRUE
Diff: 1
Topic: The Stockholders' Report
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
4) The Sarbanes-Oxley Act of 2002 established the Public Company Accounting Oversight
Board (PCAOB) which is a not-for-profit corporation that oversees auditors of public
corporations.
Answer: TRUE
Diff: 1
Topic: The Stockholders' Report
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
1
Copyright © 2019 Pearson Education, Inc.
,5) The Sarbanes-Oxley Act of 2002 was passed to eliminate many of the disclosure and conflict-
of-interest problems of corporations.
Answer: TRUE
Diff: 1
Topic: The Stockholders' Report
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
6) The Sarbanes-Oxley Act of 2002 established the Private Company Accounting Oversight
Board (PCAOB) which is a for-profit corporation that oversees CEOs of public corporations.
Answer: FALSE
Diff: 1
Topic: The Stockholders' Report
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
7) Publicly owned corporations with more than $5 million assets are required by the Securities
and Exchange Commission (SEC) to provide their stockholders with an annual stockholders'
report.
Answer: TRUE
Diff: 1
Topic: The Stockholders' Report
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
8) The letter to stockholders is the primary communication from management in an annual
report.
Answer: TRUE
Diff: 1
Topic: The Letter to Stockholders
Learning Obj.: LG 1
Learning Outcome: F-01
AACSB: Analytical Thinking
9) Common stock dividends paid to stockholders is equal to the earnings available for common
stockholders divided by the number of shares of common stock outstanding.
Answer: FALSE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
2
Copyright © 2019 Pearson Education, Inc.
,10) The income statement is a financial summary of a firm's operating results during a specified
period while the balance sheet is a summary statement of a firm's financial position at a given
point in time.
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
11) The common stock entry in balance sheet is the par value of common stock.
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
12) Paid-in capital in excess of par represents the proceeds in excess of par value received from
the original sale of common stock.
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
13) Earnings per share represents amount earned during the period on each outstanding share of
common stock.
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
14) Net fixed assets represent the difference between gross fixed assets and the amount of
depreciation expense from the most recent year.
Answer: FALSE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
3
Copyright © 2019 Pearson Education, Inc.
, 15) Earnings per share results from dividing earnings available for common stockholders by the
number of shares of common stock authorized.
Answer: FALSE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
16) Retained earnings represent the cumulative total of all earnings, net of dividends, that have
been retained and reinvested in the firm since its inception.
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
17) The balance sheet is a statement which balances a firm's assets (what it owns) against its debt
(what it owes) and its equity (what is provided by owners).
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
18) The amount paid in by the original purchasers of common stock is shown by two entries in
the firm's balance sheet—common stock and paid-in capital in excess of par on common stock.
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
19) The original price per share received by the firm on a single issue of common stock is equal
to the sum of the common stock and paid-in capital in excess of par accounts divided by the
number of shares outstanding.
Answer: TRUE
Diff: 1
Topic: The Four Key Financial Statements
Learning Obj.: LG 1
Learning Outcome: F-02
AACSB: Analytical Thinking
4
Copyright © 2019 Pearson Education, Inc.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller premiumbiz379. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.61. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
80202 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now