Finance

True / False Questions

1. An asset's liquidity is determined by how readily the asset can be converted to an appropriate amount of cash.

TRUE

AACSB: Communication Abilities

Bloom's: Knowledge

Difficulty: Easy

Learning Objective: 3-1

2. The principal reason for excluding many intangible assets from the balance sheet is that they are difficult to value.

TRUE

AACSB: Reflective Thinking Skills

Bloom's: Understanding

Difficulty: Medium

Learning Objective: 3-1

3. The difference between gross fixed assets and net fixed assets is accumulated depreciation.

TRUE

AACSB: Reflective Thinking Skills

Bloom's: Understanding

Difficulty: Easy

Learning Objective: 3-1

4. Fixed assets can be either tangible or intangible assets.

TRUE

AACSB: Communication Abilities

Bloom's: Knowledge

Difficulty: Medium

Learning Objective: 3-1

5. Balance sheets have traditionally recorded amounts in terms of market values.

FALSE

AACSB: Communication Abilities

Bloom's: Knowledge

Difficulty: Easy

Learning Objective: 3-1

6. All items in the common-size balance sheet are expressed as a percentage of total assets.

TRUE

AACSB: Communication Abilities

Bloom's: Knowledge

Difficulty: Medium

Learning Objective: 3-1

7. The income statement resembles a snapshot of the firm at a specific time.

FALSE

AACSB: Reflective Thinking Skills

Bloom's: Understanding

Difficulty: Easy

Learning Objective: 3-1

8. If the market value of assets is high, then the market value of liabilities must be high also.

FALSE

AACSB: Reflective Thinking Skills

Bloom's: Understanding

Difficulty: Hard

Learning Objective: 3-1

9. One reason for the difference between profits and cash is that the cost of capital equipment is spread over the forecast life.

TRUE

AACSB: Reflective Thinking Skills

Bloom's: Understanding

Difficulty: Easy

Learning Objective: 3-3

10. Accrual accounting aims to provide a fairer...