Study Questions 2A (Part 1)

1. Financial statements provide useful information about a company’s financial position on

financing and investing activities at a point in time and summarize operating activities for a period
of time ( )
2. Basically financial statement consist of Balance sheet and customer identification ( ).
3. The income statement answer the question ‘how profitable is your business’. ( )
4. A current asset has a life of less than 2 years ( )
5. Short term notes refer to the amount borrowed from a creditor that are due within 10 years ( )
6. Balance sheet is a financial statement showing a firm’s accounting value on a particular date.
7. The difference between the total value current assets and current liabilities is the long term
debt . ( )
8. Net working capital = Current Asset – Current Liabilities ( )
9. Liquidity refers to the speed and ease with which an asset can be converted to fixed assets
10. A highly liquid asset is therefore one that can be quickly sold without significant loss of value
11. Liquidity is valuable ( )
12. The more liquid a business is the less likely it is to experience financial distress. ( )
13. The use of debt in a firm’s capital structure is called a financial leverage ( )
14. The more debt a firm has, the less degree of financial leverage. ( )
15. Book value refer to the value of assets that are actually NOT worth. ( )
16. Income statement comprise of revenues less sales for the period ( )
17. Sales –expenses = Profit ( )
18. The income statement answer the main question “ How long you take your personal loan to
set your business’’ ( )
19. Cost of goods sold is the cost of producing or acquiring the goods or services to be sold ( )
20. The less current asset that a firm has relative to its current liabilities, the greater the firm’s
liquidity. ( )
21. Operating expenses refer to those expenses relate to marketing and distributing product &
services ( )
22. Operating income is also known as earnings before interest and taxes ( )
23. Interest expense refer to the interest paid on the firm’s outstanding debt ( )
24. Net income represent the amount of loss to a firm ( )
25. Short term note represent amounts borrowed from bank or other lending sources that are due
and payable within 12 months. ( )
26 Income statement provide a report of investments made and their cost for a specific period of
time . ( )
27. Income statement provide all firm’s assets and liabilities for a defined period of time ( )
28. Revenue minus cost of goods sold minus operating expenses equal to EBIT. ( )
29. Benchmarking is where the firm’s ratio values are compared to those of a key competitor or
group of competitors, primarily to identify areas for improvement. ( )
30. Cash, accruals, inventory and account receivables are examples of current assets ( )

Study Questions 2B (Part 1)

1. Preparing Financial statement
Base on the following information for AZRA corp. , you need to prepare an (a)income
statement for 2010 & 2011 and also balance sheet for 2010 and 2011. Use a 35% tax
rate throughout.
2010 2011
Sales RM4,300 RM4,500
Cost of good sold 2,000 2,500
Depreciation 700 900
Interest 100 190
Dividends 200 250
Current Assets 2,205 2,429
Net fixed assets 7,344 7,650
Current liabilities 1,003 1,255
Long term debt 3,106 2,085

2. During 2007, R&R Corp. had sales of RM900,000. Cost of goods sold, administrative
and selling expenses and depreciation expenses were RM620,000, RM120,000 and
RM30,000, respectively. In addition, the company had an interest expense of RM5,000
and tax rate of 35%.
a) What is R&R’s net income for 2007?

Study Questions 2C (Part 1)

1. During 2008, Siti O Corp. had sales of RM125,000. Cost of goods sold,RM75,000
administrative and selling expenses , RM33,500 and depreciation expenses were
RM4,500, In addition, the company had an interest expense of RM3,000 and tax rate of
50%. a) What is Siti O’s net income for 2008?

2.During 2008, Cristiano Ronaldinho corporation. had sales of RM160,000. Cost of

goods sold,RM96,000 administrative and selling expenses , RM37,000 and depreciation
expenses were RM10,000, In addition, the company had an interest expense of
RM6,100 and tax rate of 50%. a) What is Cristiano Ronaldinho’s net income for 2008?