Analysis Intermediate: Understanding the Balance Sheet

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1.
Which of the following pieces of information about a company do balance sheets not provide?
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The stock quote of the company. Balance sheets provide financial information on a company. They do not include stock quotes.
2.
If the total liabilities of a company are 2 million dollars, and total assets are 5 million dollars, how much is shareholder equity?
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3 million dollars. Shareholder equity is the difference between total assets and total liabilities. When creating a balance sheet, however, you must include shareholder equity with liabilities.
3.
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.
4.
Shareholder equity is ________.
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The amount of capital invested by the owners. This is evidenced by stock ownership.
5.
Balance sheets balance taxes with income.
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False. Balance sheets balance assets with liabilities. Taxes and income are included in assets and liabilities.
6.
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.
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.
Liabilities are what a company _______.
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Owes to others. Whatever a company must pay to another party is a liability.