Chapter Two Essay

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• The financial statement showing a firm's accounting value on a particular date is the: balance sheet.

• A current asset is: cash or an item currently owned by the firm that will convert to cash within the next 12 months.

• The long-term debts of a firm are liabilities: that do not come due for at least 12 months.

• Net working capital is defined as: current assets minus current liabilities. • A __ liquid __ asset is one which can be quickly converted into cash without significant loss in value.

• The financial statement summarizing a firm's accounting performance over a period of time is the: income statement.

• Noncash items refer to: expenses charged against revenues that do not directly affect cash
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• Which one of the following accounts is generally the most liquid? Accounts receivable

• Which one of the following statements concerning liquidity is correct? Balance sheet accounts are listed in order of decreasing liquidity.

• Liquidity is: valuable to a firm even though liquid assets tend to be less profitable to own.

• Which of the following accounts are included in shareholders' equity?
I. retained earnings
IV. capital surplus

• Book value: is based on historical cost.

• When making financial decisions related to assets, you should: always consider market values.

• As seen on an income statement: depreciation reduces both the pretax income and the net income.

• The earnings per share will: increase as net income increases.

• Dividends per share: are equal to the amount of net income distributed to shareholders divided by the number of shares outstanding.
• According to Generally Accepted Accounting Principles, income is recorded based on the realization principle.

• According to Generally Accepted Accounting Principles, costs are: matched with revenues.

• Depreciation: is a non-cash expense that is recorded on the income statement. • When you are making a financial decision, the most relevant tax rate is the ___ marginal__ rate.

• An increase in which one of the following will

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