Question

10. Match the following definitions: (2p each, total 20p) The ability to convert an asset into cash quickly without a significant loss of its value. Raw materials, work in progress, and finished goods held by the firm for eventual sale. ( ) Expenses that have been incurred but neither the related invoice received nor paid. ( ) A noncash expense to allocate the cost of depreciable assets, such as plant and equipment, over the life of the asset. (Money owed to suppliers for goods or services purchased (Investors who own the firm's common stock () The difference between a firm's current assets and its current liabilities ( ) Cumulative undistributed profits A statement in which the items are expressed as a percentage of total assets. (Sales on credit divided by accounts receivable (Note that only 10 of the choices to be matched) a) Accounts Receivable c) Assets turnover e) Common-sized Balance Sheet g) Common stockholders i) Depreciation Expense k) Earnings per share m) Inventory o) Net working capital a) Receivables turnover s) Trade Credit b) Accrued Expenses d) Budgeted Expenses f) Common-sized Income Statement h) Cumulative Depreciation j) Dividends 1) Liquidity n) Inventory turnover p) Paid in capital r) Retained earnings t) Working capital 11. State name of the statement in which the following items belongs to: (1p each, total 10p) Income Statement Balance Sheet ( ) () A. Inventory B. Accumulated Depreciation C. Plant & Equipment D. Interest Expense E. Cash F. Depreciation Expense G. Short Term Notes Payable H. Sales I. Long Term Debt J. Tax Cocos Cocos

Answer 1

QUESTION 10

• The ability to convert an asset into cash quickly without a significant loss of its value - l) Liquidity
• Raw materials, work in progress, and finished goods held by the firm for eventual sale - m) Inventory
• Expenses that have been incurred but neither the related invoice received nor paid - b) Accrued Expenses
• A noncash expense to allocate the cost of depreciable assets, such as plant and equipment, over the life of the asset - i) Depreciation Expense
• Money owed to suppliers for goods or services purchased - s) Trade Credit
• Investor's who own the firm's common stock - g) Common stockholders
• The difference between a firm's current assets and its current liabilities - o) Net working capital
• Cumulative undistributed profits - r) Retained earnings
• A statement in which the items are expressed as a percentage of total assets - e) Common sized Balance sheet
• Sales on credit divided by accounts receivable - q) Receivables turnover

A brief explanation of the remaining choices:

• Accounts receivable - the amount due to the firm and not paid by the customers for goods or services delivered by the firm.
• Assets turnover - net sales divided by average total assets.
• Budgeted expenses - expenses forecasted to incur in the future.
• Common-sized income statement - an income statement in which each line item is expressed as a percentage of total sales.
• Cumulative depreciation - the total amount of accumulated depreciation of an asset up to a given date.
• Dividends - amount distributed by a company to its shareholders out of its profits.
• Earnings per share - Net income after preference dividend divided by weighted average number of common shares outstanding.
• Inventory turnover - Cost of goods sold divided by average inventory.
• Paid in capital - amount of capital paid by the shareholders (out of subscribed capital)
• Working capital - current assets. (net working capital is sometimes referred to as simply working capital)

QUESTION 11

Inventory	Balance sheet	Under current assets
Accumulated depreciation	Balance sheet	As a reduction from gross amount of fixed assets
Plant and equipment	Balance sheet	Under property, plant & equipment
Interest expense	Income statement	Under non-operating expenses
Cash	Balance sheet	Under current assets
Depreciation expense	Income statement	Operating – expenses
Short term notes payable	Balance sheet	Under current liabilities
Sales	Income statement	It’s an operating item
Long term debt	Balance sheet	Non-current liabilities
Tax	Income statement	As a separate line item and reduced from pre-tax income