Overview Of Financial Statements

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| By Jillkredden

Jillkredden

Community Contributor

Quizzes Created: 1 | Total Attempts: 260

Questions: 6 | Attempts: 260 | Updated: Mar 20, 2023

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This quiz provides an overview of financial statements, focusing on understanding income statements, balance sheets, and key financial formulas. It assesses the ability to identify true statements about financial documents and solve practical problems like calculating breakeven points.

Questions and Answers

1.

An income statement is a summary of the revenue generated and expenses paid during a given time period.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
An income statement is a financial statement that provides a summary of the revenue earned and expenses incurred by a company over a specific period. It helps to determine the profitability and financial performance of the business. The statement includes revenue from sales, operating expenses, taxes, and other costs. By analyzing an income statement, stakeholders can assess the company's ability to generate profit, identify trends, and make informed decisions. Therefore, the given statement is true as it accurately describes the purpose and content of an income statement.

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2.

Revenues - Expenses = Net Income is the formula associated with the balance sheet.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
Revenues - Expenses = Net Income is the formula associated with the income statement.

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3.

An income statement is also known as a profit and loss statement.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
An income statement is indeed also known as a profit and loss statement. This financial statement provides a summary of a company's revenues, expenses, and net income over a specific period. It helps to determine the profitability and financial performance of a business. The terms "income statement" and "profit and loss statement" are often used interchangeably in the accounting and financial reporting context.

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4.

Liabilities + Owner's equity = Assets is the formula associated with the profit and loss statement.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
Liabilities + Owner's equity = Assets is the formula associated with the balance sheet. The profit and loss statement is another name for the income statement.

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5.

When forecasting, it is important to consider the price per unit sold and the cost per unit sold.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
When forecasting, it is important to consider the price per unit sold and the cost per unit sold because these factors directly impact the profitability of a business. By analyzing the price per unit sold, businesses can determine the revenue they will generate from each unit sold. On the other hand, the cost per unit sold helps in determining the expenses incurred in producing and selling each unit. By considering both factors, businesses can accurately forecast their sales and make informed decisions regarding pricing, production, and overall profitability.

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6.

Using the breakeven point formula, Y = A(x) - B(x), find the number of candy boxes that need to be sold in a month for the business to breakeven. The boxes of candy sell for $0.25/box. The variable cost is $0.15/box. The business has a fixed cost monthly of $250.
- A.
  
  250
- B.
  
  2500
- C.
  
  25000
- D.
  
  None of the above.
Correct Answer
B. 2500

Explanation
Y = A(x) - B(x)
Y= 250
A = 0.25
B = 0.15
250 = 0.25(x) - 0.15(x)
250 = 0.10(x)
250/0.10 = 0.10(x)/0.10
2500 = x

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Current Version
Mar 20, 2023

Quiz Edited by
ProProfs Editorial Team
Oct 10, 2011

Quiz Created by
Jillkredden

Overview Of Financial Statements

An income statement is a summary of the revenue generated and expenses paid during a given time period.

Revenues - Expenses = Net Income is the formula associated with the balance sheet.

An income statement is also known as a profit and loss statement.

Liabilities + Owner's equity = Assets is the formula associated with the profit and loss statement.

When forecasting, it is important to consider the price per unit sold and the cost per unit sold.

Using the breakeven point formula, Y = A(x) - B(x), find the number of candy boxes that need to be sold in a month for the business to breakeven. The boxes of candy sell for $0.25/box. The variable cost is $0.15/box. The business has a fixed cost monthly of $250.