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Stocks 302: Understanding the Balance Sheet

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1.
The resources that a firm buys are not considered assets unless they are believed to provide economic benefits.
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True. Otherwise, they are merely items.
2.
If you want to learn the kinds of assets a company is buying, you can find them on the balance sheet.
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True. The balance sheet will identify assets that the company has bought.
3.
When assets outweigh liabilities and shareholder equity on a balance sheet, the sheet has not been constructed correctly.
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True. Balance sheets balance the two sides so that all assets and their sources of payment are accounted for.
4.
Liabilities are what a company _______.
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Owes to others. Whatever a company must pay to another party is a liability.
5.
Shareholders equity is included in which part of the equation for the balance sheet?
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Liabilities. In the world of the balance sheet, it is a liability because it pays for assets.
6.
The balance sheet item that allows one to spread the purchase price of a fixed asset over the course of years is called ________.
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Depreciation. Depreciation is subtracted on the asset side of the balance sheet.
7.
Shareholder equity is ________.
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The amount of capital invested by the owners. This is evidenced by stock ownership.
8.
Balance sheets balance _______.
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Assets with liabilities. Equity, debt, taxes, and income are all included in assets and liabilities.