True or False? a) Calculation of retained earnings is one of the factors cited b

Question

True or False?

a) Calculation of retained earnings is one of the factors cited by our author for why NI and CF may be different.

b)

COGS appears on the asset side of the BS.

C)

?EBIT can be found by subtracting SGA and Depreciation from the gross profit margin.

D)

?Changes in interest expense do not affect a? firm’s cash position.

E)

The balance sheet identity indicates that total liabilities can be found by adding total assets to total equity.

F)?If there is no change in gross fixed assets from one year to the? next, then net fixed assets would have to have increased.

G)Accounts payable represents? short-term loans extended to the corporation by suppliers.

Explanation / Answer

a.) FALSE

Retained Earnings has no impact on cash flow (CF) of the company. After arriving at net income we set aside a fund balance by the name of retained earning before giving dividend of the company. Basically this fund remains with the company itself. So retained earnings does not give difference between CF and NI.

b.) False (condition apply)

The cost of goods sold is reported on the income statement and can be considered as an expense of the accounting period. However, the cost of the merchandise purchased but not yet sold is reported in the account Inventory or Merchandise Inventory. Inventory is reported as a current asset on the company's balance sheet

c.) True

By subtracting operating expense (excluding interest and tax) from gross profit EBIT can be calculated.

d.) False

Paying interest reduces cash of the firm . Even if it is due but not paid at some point in future actual payment had to be done if it is not waived off.

e.) False

Total Assets= Total Liabiltities + Shareholders Equity

Total Liabilities= Total Assets- Shareholders Equity

f.)False

Net Fixed Asset= Gross Fixed Asset- Accumulated Depreciation

If Gross Fixed Aset is same over the years then accumulated depreciation always increases and net fixed asset will reduce over the years.

g.) False

Accounts payable is short term liabilties of normal business course usually used for some expense which remains unpaid like payment due to supplier for goods purchased from him.

Short term loans usually refers to amount borrowed which normally has to be paid with some intrest obligations.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.