Financial Statement Analysis and Valuation 6th edition by Peter D. Easton Test bank

B) Property, plant and equipment
C) Nonowner financing
D) Cash
E) Dividends
Answer: E
Rationale: The balance sheet reports assets (including cash and property, plant and equipment),
liabilities (including nonowner financing) and equity. Dividends are reported on statement of
stockholders’ equity.
Topic: Profit and Cash Flow
LO: 3
5. A company’s net cash flow will equal its net income …
A) Almost always
B) Rarely
C) Occasionally
D) Only when the company has no investing cash flow for the period
E) Only when the company has no investing or financing cash flow for the period
Answer: B
Rationale: Net income reflects the company’s revenue minus expenses for the given period. Net
cash flow represents the amount of money received (spent) on operating, investing and financing
activities for the given period. These values are rarely the same.
Topic: Financial Statement Information
LO: 3
6. Which of the following statements are correct (select all that apply)?
A) A balance sheet reports on investing and financing activities.
B) An income statement reports on financing activities.
C) The statement of equity reports on changes in the accounts that make up equity.
D) The statement of cash flows reports on cash flows from operating, investing, and financing
activities over a period of time.
E) A balance sheet reports on a company’s assets and liabilities over a period of time.
Answer: A, C, and D
Rationale: Statement (B) is incorrect—the statement of cash flows reports on financing activities that
are reflected on the balance sheet. Statement (E) is incorrect—the balance sheet reports on a
company’s assets and liabilities at a point in time.
© Cambridge Business Publishers, 2021
1-7  Financial Statement Analysis & Valuation, 6 th Edition
Topic: Balance Sheet—Numerical calculations required
LO: 3
7. Kelty Company’s year-end financial statements reported the following (in millions):
Total assets  $41,278
Total liabilities  29,465
Total shareholders’ equity  11,813
Dividends  205
Net income (loss)  3,160
Retained earnings, Jan. 1  11,425
What did Kelty Company report for retained earnings at December 31?
A) $14,380 million
B) $14,768 million
C) $14,790million
D) $14,585 million
E) There is not enough information to determine the answer.
Answer: A
Rationale:
(in millions)
Retained earnings, Jan. 1  $11,425
Net income  3,160
Dividends  (205)
Retained earnings, Dec. 31  $14,380
Topic: Balance Sheet—Numerical calculations required
LO: 3
8. United Company’s year-end balance sheet reported the following (in millions)
Total Assets  $100,228
Total Liabilities  78,713
Contributed Capital  8,933
What was United Company’s total liabilities and stockholders’ equity at December 31?
A) $ 87,646 million
B) $ 91,295 million
C) $100,228 million
D) $ 21,515 million
Answer: C
Rationale: Assets = Liabilities + Stockholders Equity.
Assets = $100,228 so this is the total of liabilities and equity combined.