Question

True or False

1.The balance sheet presents a summary of the firm's revenues and expenses over an accounting period.

2. One of the biggest noncash items on the income statement is depreciation which needs to be subtracted from net income to determine cash flows for the firm

3. A liquid asset is an asset that can be easily converted into cash without a significant loss of its original value.

4. Retained earnings is the cash that has been generated by the firm through its operations which has not been paid out to stockholders as dividends. Retained earnings are kept in cash or near cash accounts and thus, these cash accounts, when added together, will always be equal to the total retained earnings of the firm.

5. American depository receipts are foreign stocks that sell in American stock exchanges and are denominated in dollar prices

Answer 1

1. False

Explanation:

Statement that shows revenue and expenses over the period is income statement.

2. False

Explanation:

Depreciation when added back to net income, provides cash flow to the firm

3. True

Explanation:

Liquid assets are the assets which can be easily converted into cash.

4.

True

Explanation:

Retained Earning is the profit of the firm accumulated over a period of time and not paid to the shareholders in the form of dividends.

5. True

Explanation:

American Depository receipt is issued by a US bank representing specified number of shares of a foreign stock.