Fin 301 Chapter 3 Exam Questions with Verified Answers
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Course
FIN301
Institution
FIN301
balance sheet - Answer-provides a snapshot of a firm's financial position at one point in time.
income statement - Answer-summarizes a firm's revenues and expenses over a given period of time.
statement of retained earnings - Answer-reconciles the firm's earnings with its balance sheet retain...
Fin 301 Chapter 3 Exam Questions with
Verified Answers
balance sheet - Answer-provides a snapshot of a firm's financial position at one point in
time.
income statement - Answer-summarizes a firm's revenues and expenses over a given
period of time.
statement of retained earnings - Answer-reconciles the firm's earnings with its balance
sheet retained earnings
Connects two statements
statement of stockholders equity - Answer-shows how much of the firm's earnings were
retained, rather than paid out as dividends.
statement of cash flows - Answer-reports the impact of a firm's activities on cash flows
over a given period of time.
current assets - Answer-cash, equivalents, AR, inventory
long term assets - Answer-net plant and equipment
current liabilities - Answer-accrued wages and taxes, AP, notes payable
equity - Answer-common stock + retained earnings must = total assets - total liabilities
net working capital - Answer-Current Assets (stuff coming in) - Current Liabilities (going
out)
liquidity - Answer-Ability to convert to cash quickly without a significant loss in value
Liquid firms are less likely to experience financial distress
But, liquid assets earn a lower return
goodwill - Answer-if you pay more than what a company is worth then the marginal
amount you paid is credited under goodwill
keynes three reasons for holding cash - Answer-transactions: change
precautionary: accidents. repairs
speculative: have to have money to make a deal
compensating balance: bank wants you to carry a little extra
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