Choose wisely. There is only one correct answer to each question.
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1.
When assets outweigh liabilities and shareholder equity on a balance sheet, the sheet has not been constructed correctly.
True. Balance sheets balance the two sides so that all assets and their sources of payment are accounted for.
2.
Shareholders equity is included in which part of the equation for the balance sheet?
Liabilities. In the world of the balance sheet, it is a liability because it pays for assets.
3.
Too many liabilities on a company balance sheet can indicate the danger of bankruptcy.
True. Too many liabilities make investors nervous.
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.
The resources that a firm buys are not considered assets unless they are believed to provide economic benefits.
True. Otherwise, they are merely items.
6.
The company E-Publisher.com owns exclusive rights to its material. This copyright is an asset.
True. Copyright is an intangible asset.
7.
Shareholder equity is ________.
The amount of capital invested by the owners. This is evidenced by stock ownership.
8.
If you want to learn the kinds of assets a company is buying, you can find them on the balance sheet.
True. The balance sheet will identify assets that the company has bought.
