Analysis Intermediate: Understanding the Balance Sheet

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1.
Current assets are called "current" because they are usually converted to cash _______.
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Within one year. This is the defining quality of current assets.
2.
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.
3.
Shareholder equity is the value of stock on the market.
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False. Shareholder equity is the amount of capital invested by the owners.
4.
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.
5.
Shareholders equity is included in which part of the equation for the balance sheet?
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Liabilities. In the world of the balance sheet, it is a liability because it pays for assets.
6.
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.
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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.
7.
Liabilities are what a company _______.
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Owes to others. Whatever a company must pay to another party is a liability.
8.
The company E-Publisher.com owns exclusive rights to its material. This copyright is an asset.
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True. Copyright is an intangible asset.