LAW I CHAPTER 4



FINANCE & BANKING ( CHAPTER 3

FINANCIAL STATEMENTS

1 BUSINESS FINANCIAL GOALS

1. Business financial goals are developed to respond to what three main financial needs?      

2. What is a creditor?      

3. What is principal?      

4. What is interest?      

5. Why might owners of small businesses have different expectations of initial success than stockholders of a large corporation?      

6. What are the origins of today’s largest businesses?      

7. What are some common ways that businesses can finance growth?      

8. What is collateral?      

9. What are some characteristics of effective business goals?      

2 UNDERSTANDING FINANCIAL STATEMENTS

10. Why do businesses prepare financial statements?      

11. What are the three primary financial statements?      

12. Who else uses financial statements besides businesses?      

13. Who requires public corporations to prepare financial statements and have them audited by an independent certified public accountant?       To whom must these statements and audit reports be available for review?      

14. What does a balance sheet identify?       What name is it also known as?      

15. What is the accounting equation?      

16. When is it mandatory for a company to prepare a balance sheet?       When are other common preparation times?      

17. What is an asset?      

18. How are assets categorized on a balance sheet?      

19. What is the difference between current assets and long-term assets?      

20. What are some examples of current assets?       What are some examples of long-term assets?      

21. What is depreciation?      

22. What are liabilities?      

23. What is an example of a current liability?      

24. What are some examples of long-term liability?      

25. What is owner’s equity?      

26. What are retained earnings?       How can they be used?      

27. Theoretically, what does a balance sheet show?      

28. What is the formula for calculating owner’s equity?      

29. How is working capital determined?      

30. What is an income statement?      

31. What ultimately does an income statement show?       In its simplest form, how is this calculated?      

32. Why should income statements and their individual categories be compared both internally and externally?      

33. What does a cash flow statement show?      

34. What is solvency?      

35. If a business has a lack of cash on hand, what might this indicate?      

36. What are some examples of cash receipts?      

37. What are some examples of cash payments?      

38. Are cash and profit the same thing?       Why or why not?      

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