Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
Which of the following is not a current asset?
Stock. Stock is not a current asset. On the balance sheet, it is a liability.
3.
Shareholder equity is the value of stock on the market.
False. Shareholder equity is the amount of capital invested by the owners.
4.
On the balance sheet, plants and machinery are included under _______.
Assets. Since they provide economic benefit to a company, they are assets.
5.
The balance sheet item that allows one to spread the purchase price of a fixed asset over the course of years is called ________.
Depreciation. Depreciation is subtracted on the asset side of the balance sheet.
6.
Balance sheets provide information on a companys stock performance.
False. Balance sheets provide financial information, but not stock performance information.
7.
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.
8.
Liabilities are what a company _______.
Owes to others. Whatever a company must pay to another party is a liability.
