Ch. 2 Quiz

The Balance Sheet identity is

• Assets+Liabilities=Stockholders' Equity

• Assets-Liabilities=Stockholders' Equity

• Assets+Sales Revenue=Stockholders' Equity

Creditors receive the first claim on the firm's cash flow over shareholders

• True

• False

Based on GAAP, firms follow the

• Cash basis of accounting

• Accrual basis of accounting

• Profit basis of accounting

Depreciation is a cash item

• True

• False

Net Working Capital=

• =Current Assets+Fixed Assets

• Current Assets+Current Liabilities

• Current Assets - Current Liabilities

• Current Assets + Shareholders' Equity

The Statement of Cash Flows includes the following components

• Cash flow from operating and financing activities

• Cash flow from financing activities

• Cash flow from investors

• Cash flow from operating, investing and financing activities

Book Value and Market Value mean the exact same thing

• True

• False

Net Income= Dividends + Addition to Retained Earnings

• True

• False