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Stocks 107: Introduction to Financial Statements

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1.
A company with lots of assets relative to liabilities on its balance sheet _______.
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Is healthier than a company with lots of liabilities. A company with lots of assets relative to liabilities would have relatively high equity (Assets - Liabilities = Equity) and less risk of going bankrupt. Generally speaking, companies with lots of assets relative to liabilities are healthier and more resistant to setbacks than companies with lots of liabilities.
2.
Which of the following is not part of the statement of cash flows?
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Cash flows from expense activities. The statement of cash flows has three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.
3.
A companys income statement shows you its revenues and expenses _______.
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Over a specific time frame. The income statement shows a companys revenues and expenses over a specific time frame such as three months or a year.
4.
The statement of cash flows tells you what?
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How much cash went into and out of a company during a specific time period. The cash flow statement is similar to the income statement, but due to accrual accounting, it covers only actual cash.
5.
On the income statement, profits tell you _______.
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The difference between how much a company brought in and how much it spent during a given period. A companys profits are the difference between how much it brought in (its revenues) and how much it spent (its expenses) during a given period.