Choose wisely. There is only one correct answer to each question.
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1.
Shareholder equity is ________.
The amount of capital invested by the owners. This is evidenced by stock ownership.
2.
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.
3.
Liabilities are what a company _______.
Owes to others. Whatever a company must pay to another party is a liability.
4.
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.
5.
How long must the useful life of an asset be for it to be treated as a fixed asset?
More than one year. If its useful life is more than one year, an asset will be considered fixed.
6.
The resources that a firm buys are not considered assets unless they are believed to provide economic benefits.
True. Otherwise, they are merely items.
7.
On the balance sheet, plants and machinery are included under _______.
Assets. Since they provide economic benefit to a company, they are assets.
8.
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.
