Chapter 2: 5DQ (page 46)
How is the income statement related to the balance sheet?
Income statement and balance sheet of a company are directly related to each other
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Indicate if there is an improvement or decline in total asset turnover, and based on the other ratios, indicate why this development has taken place.
Fill in the blank spaces with categories 1 through 7:
1. Balance sheet (BS)
2. Income statement (IS)
3. Current assets (CA)
4. Fixed assets (FA)
5. Current liabilities (CL)
6. Long-term liabilities (LL)
7. Stockholders’ equity (SE)
Indicate whether item is on Balance sheet (BS) or Income statement (IS) | If on Balance sheet, designate which category | Item |
Accounts receivable | ||
Retained earnings | ||
Income tax expense | ||
Accrued expense | ||
Cash | ||
Selling and administrative expenses | ||
Plant and equipment | ||
Operating expenses | ||
Marketable securities | ||
Interest expense | ||
Sales | ||
Notes payable (6 month) | ||
Bonds payable, maturity 2019 | ||
Common stock | ||
Depreciation expense | ||
Inventories | ||
Capital in excess of par value | ||
Net income (earning after tax) | ||
Income tax payable |
What advantage does the fixed charge coverage ratio offer over simply using times interest earned?
Explain how depreciation generates actual cash flows for the company.
What is the difference between accumulated depreciation and depreciation expense? How are they related?
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