Analysis Intermediate: Understanding the Balance Sheet

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1.
Balance sheets provide information on a companys stock performance.
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False. Balance sheets provide financial information, but not stock performance information.
2.
Shareholder equity is ________.
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The amount of capital invested by the owners. This is evidenced by stock ownership.
3.
Too many liabilities on a company balance sheet can indicate the danger of bankruptcy.
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True. Too many liabilities make investors nervous.
4.
A companys assets are paid for with liabilities and shareholder equity.
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True. Liabilities (debt) and shareholder equity (stock) finance the purchase of assets.
5.
Balance sheets balance _______.
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Assets with liabilities. Equity, debt, taxes, and income are all included in assets and liabilities.
6.
On the balance sheet, plants and machinery are included under _______.
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Assets. Since they provide economic benefit to a company, they are assets.
7.
Which of the following is not a current asset?
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Stock. Stock is not a current asset. On the balance sheet, it is a liability.
8.
How long must the useful life of an asset be for it to be treated as a fixed asset?
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More than one year. If its useful life is more than one year, an asset will be considered fixed.