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1.
A company with lots of assets relative to liabilities on its balance sheet _______.
Is healthier than a company with lots of liabilities. A company with lots of assets relative to liabilities would have relatively high equity (Assets - Liabilities = Equity) and less risk of going bankrupt. Generally speaking, companies with lots of assets relative to liabilities are healthier and more resistant to setbacks than companies with lots of liabilities.
2.
Current assets are _______.
Assets likely to be used up or converted into cash within the next year. Current assets are likely to be used up or converted into cash within one business cycle, usually defined as one year.
3.
The three elements of a balance sheet are _______.
Assets, liabilities, and shareholder equity. The balance sheet tells you how much a company owns (its assets) and how much it owes (its liabilities). The difference between what it owns and what it owes is its equity.
4.
Which of the following is not part of the statement of cash flows?
Cash flows from expense activities. The statement of cash flows has three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.
5.
The three elements of an income statement are _______.
Revenues, expenses, and profit. The income statement tells you how much money a company has brought in (its revenues), how much it has spent (its expenses), and the difference between the two (its profit).
