1. Which of the following best describes why firms produce financial statements?
ID: 2681850 • Letter: 1
Question
1. Which of the following best describes why firms produce financial statements?a.To use a tool when planning future investments within the firm.
b.To provide interested parties, both inside and outside the company, with an overview of the short and long term financial condition of a business.
c.To provide a means of enticing new investors to a firm
d.To show what activities the company has undertaken in the previous financial year, and what activities are planned for the near future
2. Which of the following best describes why the left and right side of a balance sheet are equal?
a.The assets must equal liabilities plus stockholders equity, because stockholders equity is the difference between the assets and the liabilities.
b.By accounting convention the assets of a company must be equal to the liabilities of the company
c.By definition the assets plus the liabilities will be the same as the stockholders equity.
d.In a properly run business, the value of liabilities will not exceed the assets held by the company.
3. Convex industries has inventories of $200 million, current assets of $1.4 billion, and current liabilities of $530 million. What is the quick ratio?
a. 0.44
b. 2.26
c. 2.12
d. 0.38
Explanation / Answer
b.To provide interested parties, both inside and outside the company, with an overview of the short and long term financial condition of a business. c.By definition the assets plus the liabilities will be the same as the stockholders equity. 2.26
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