Question

1. When reviewing a company’s financial statements, the primary concern for a creditor is the company’s liquidity.

   True

   False

2. During a period when unit costs are increasing, the FIFO method of valuing inventory costs will produce a lower net income than the LIFO method.

   True

   False

3. The balance sheet includes assets, liabilities and stockholders' equity as of a point in time.

   True

   False

4. Which of the following would not typically be disclosed in the notes to the financial statements?

   		The net income earned by the business to date.
   		Revenues reported by business segments.
   		Additional detail regarding reported numbers.
   		A summary of significant accounting policies.

Answer 1

Part a) option A------ True

Primary concern for creditor to company is liquidity since it identifies the fact whether company has sufficient funds which can be paid to its creditors or not.

Part b) option B--------- False

During rising prices or inflation, COGS will be higher in case of LIFO which results in lower net income. Vice versa in FIFO

Part 3)Option A------ True

Balance sheet depicts Assets, liabilities and shareholders equity at a particular point of time

Part 4) option A------ net income earned by business to date

Same is reported in Income statement of Financial statements