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1.
If the total liabilities of a company are 2 million dollars, and total assets are 5 million dollars, how much is shareholder equity?
3 million dollars. Shareholder equity is the difference between total assets and total liabilities. When creating a balance sheet, however, you must include shareholder equity with liabilities.
2.
The resources that a firm buys are not considered assets unless they are believed to provide economic benefits.
True. Otherwise, they are merely items.
3.
Liabilities are what a company _______.
Owes to others. Whatever a company must pay to another party is a liability.
4.
Steve, a beginning investor, wants to see the balance sheet of his chosen company show a huge profit. If the balance sheet is prepared correctly, it is possible that it will show a profit during a good year.
False. One of the cardinal rules of balance sheets is that assets and liabilities balance each other. Steve is looking at the wrong piece of data.
5.
Shareholder equity is the sum of the companys assets.
False. The value of assets remaining after all the liabilities have been accounted for belongs to the shareholders.
6.
Balance sheets provide information on a companys stock performance.
False. Balance sheets provide financial information, but not stock performance information.
7.
How do you know when a document is a balance sheet?
Its assets equal its liabilities and shareholder equity. To be a balance sheet, all of the assets must equal all of the liabilities and shareholder equity.
8.
The company E-Publisher.com owns exclusive rights to its material. This copyright is an asset.
