BMAL-590 Business Finance Questions With Solutions
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Course
BMAL 590
Institution
BMAL 590
BMAL-590 Business Finance Questions With
Solutions
Securities and Exchange Commission (SEC) The agency of the U.S. government that
oversees U.S. financial markets and accounting standard-setting bodies.
regulates publicly traded U.S. companies as well as the nation's stock and bond markets. I...
BMAL-590 Business Finance Questions With
Solutions
Securities and Exchange Commission (SEC) The agency of the U.S. government that
oversees U.S. financial markets and accounting standard-setting bodies.
regulates publicly traded U.S. companies as well as the nation's stock and bond markets. It
mandates that companies generate financial statements following international accounting
standards (IAS)
The SEC requires four key financial statements:
(1) the balance sheet
(2) the income statement
(3) the statement of retained earnings
(4) the statement of cash flows
Public Company Accounting Oversight Board (PCAOB) The group charged with
determining auditing standards and reviewing the performance of auditing firms. It effectively
gives the SEC authority to oversee the accounting profession's activities
Established by the Sarbanes-Oxley Act of 2002
,BMAL-590 Business Finance Questions With
Solutions
International Financial Reporting Standards (IFRS) used in many countries as the
regulatory basis for the preparation of financial statements. They are designed to provide a
common global language for financial reporting, particularly in the European Union, so
published financial information is comparable across international boundaries.
A firm's balance sheet presents a "snapshot" view of the company's financial position at a
specific moment in time.
By definition, a firm's assets must equal the combined value of its liabilities and stockholders'
equity.
The basic balance sheet equation is Assets = Liabilities + Stockholders' Equity. Thus, creditors
and equity investors finance all of a firm's assets.
The balance sheet consist of three sections that list a firm's assets and liabilities as well as the
claims of the stockholders.
ssets and liabilities appear in descending order of liquidity,
,BMAL-590 Business Finance Questions With
Solutions
Liquidity The length of time it takes to convert accounts into cash during the normal
course of business. The most liquid asset (cash) appears first, and the least liquid (fixed assets)
comes last.
Current assets are those that are easy to sell and turn into cash, while fixed assets are physical
assets like buildings and equipment.
Assets include everything that can be used to benefit the business or give the company the
right to receive benefits
Current Liabilities those that must be paid within one year and include accounts payable,
notes payable, and accrued expenses
Long-term liabilities due after more than a year and include deferred taxes and long-term
debt.
, BMAL-590 Business Finance Questions With
Solutions
stockholders' equity The last entry on the balance sheet, stockholders' equity is the owners'
residual share of the business, including their original investment plus any money the firm has
earned and retained since its inception.
Stockholders' equity includes preferred stock, common stock, paid-in-capital in excess of par,
and retained earnings. However, the net worth of the firm includes only the common stock, paid-
in-capital in excess of par, and retained earning.
Balance Sheet Assets -organized in order of liquidity:
1. Current Assets
-includes all cash and items expected to be converted into cash in next 12 months
A. Cash and Equivalents - money market
B. Accounts Receivable - amounts due from customers
C. Inventory - cost of raw materials
D. Prepaid Expenses - rents, taxes, prepaid advertising
2. Fixed Assets
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