Business Finance Chapter 2 Study Plan Questions and Notes

Chapter 2 study plan questions

Which of the following is a variation of the accounting identity? Owner’s Equity = Assets – Liabilities.

What do balance sheets do? Show how the firm raised funds to purchase assets.

The right-hand side of the balance sheet shows: how the firm financed its assets.

The balance sheet is a snapshot of the firm at a particular point in time.

An income statement contains all of the following except: Assets.

Which of the following is not included in a cash flow statement? Labor productivity.

Which of the following is another way to think about the accounting identity? Investments = Investments paid for with debt + Investments paid for with equity.

What are you not likely to find when conducting financial analysis? Absolute answers to specific questions when using ratios.

In cross-sectional analysis, a firm’s financial ratios are: Judged against the performance of firms in the same industry or if not clear industry is apparent, to firms with similar characteristics.

The four-digit codes used by the government to classify firms into industries are known as SIC codes.

In common-sized financial statements: Depreciation expense is divided by total sales.

Find the return on assets of net income was $54,000, total assets are $117,000, EBIT was $105,000, and equity is $73,000: The formula is Net Income / Total assets.

What is the return on equity if net income was $52,000, total assets are $112,000, EBIT was $99,000, and stockholder’s equity is $74,000. The formula is: Net Income / Total equity. Ans: 70.3.

Sales for a firm are $507,000, cost of goods sold are $391,000, and interest expenses are $24,000. What is the gross profit margin? The formula is: Gross profit / Sales. Ans: 22.9% (note: gross profit is sales minus COGS; do not include tax).

If net income was $9,900, interest expense was $3,700, and taxes were $930, what is the operating profit margin if sales were $46,000? Formula for operating profit margin...