Chap 3 Risk and Insurance

Chapter 03
Working with Financial Statements

Multiple Choice Questions

1. Activities of a firm which require the spending of cash are known as:
A. sources of cash.
B. uses of cash.
C. cash collections.
D. cash receipts.
E. cash on hand.

2. The sources and uses of cash over a stated period of time are reflected on the:
A. income statement.
B. balance sheet.
C. tax reconciliation statement.
D. statement of cash flows.
E. statement of operating position.

3. A common-size income statement is an accounting statement that expresses all of a firm's expenses as percentage of:
A. total assets.
B. total equity.
C. net income.
D. taxable income.
E. sales.

4. Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a common point in time?
A. statement of standardization
B. statement of cash flows
C. common-base year statement
D. common-size statement
E. base reconciliation statement

5. Relationships determined from a firm's financial information and used for comparison purposes are known as:
A. financial ratios.
B. identities.
C. dimensional analysis.
D. scenario analysis.
E. solvency analysis.

6. The formula which breaks down the return on equity into three component parts is referred to as which one of the following?
A. equity equation
B. profitability determinant
C. SIC formula
D. Du Pont identity
E. equity performance formula

7. The U.S. government coding system that classifies a firm by the nature of its business operations is known as the:
A. NASDAQ 100.
B. Standard & Poor's 500.
C. Standard Industrial Classification code.
D. Governmental ID code.
E. Government Engineered Coding System.

8. Which one of the following is a source of cash?
A. increase in accounts receivable
B. decrease in notes payable
C. decrease in common stock
D. increase in accounts payable
E. increase in inventory

9. Which one of the following is a use of cash?
A. increase in notes payable
B.