This document provides an overview of Chapter 2 - Financial Statement and Cash Flows from a foundations of finance course. It includes sample true/false and multiple choice questions about key financial concepts like income statements, balance sheets, financial ratios, and cash flows. It also includes a partial balance sheet for Waya Inc. Corporation and financial data to complete the balance sheet. The balance sheet shows assets, liabilities, and stockholders' equity for the company as of December 31, 2011.

1. FOUNDATION OF FINANCE (BWFF1013)
FIRST SEMESTER 2012/2013 (A121)
CHAPTER 2-FINANCIAL STATEMENT AND CASH FLOWS
Section A
Please circle TRUE or FALSE to the following statements.
1) An income statement reports a firm's cumulative revenues and expenses from the
inception of the firm through the income statement date.
Answer: TRUE/FALSE
2) A firm's income statement reports the results from operating the business for a period
of time, while the firm's balance sheet provides a snapshot of the firm's financial position at a
specific point in time.
Answer: TRUE/FALSE
3) Financial ratios are useful for evaluating performance but should not be used for
making financial projections.
Answer: TRUE/FALSE
4) The current ratio and the acid test ratio both measure financial leverage.
Answer: TRUE/FALSE
Section B
Please circle the correct answer.
1) The basic format of an income statement is
A) Sales - Expenses = Profits
B) Income - Expenses = EBIT
C) Sales - Liabilities = Profits
D) Assets - Liabilities = Profits
2) JJ Rlooing reported the following items for the current year: Sales = RM3,000,000;
Cost of Goods Sold = RM1,500,000; Depreciation Expense = RM170,000;
Administrative Expenses = RM150,000; Interest Expense = RM30,000; Marketing
Expenses = RM80,000; and Taxes = RM300,000. JJ’s operating income is equal to
A) $770,000.
B) $1,070,000.
C) $1,100,000.
D) $1,500,000.
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2. 3) JJ’s net profit margin is equal to
A) 25.67%.
B) 35.67%.
C) 36.67%.
D) 50.00%.
4) Net working capital is equal to
A) total assets minus total liabilities.
B) current assets minus total liabilities.
C) total operating capital minus net income.
D) current assets minus current liabilities.
5) A company borrows $2,000,000 and uses the money to purchase high technology
machinery for its operations. These are examples of
A) cash flow from financing and cash flow from operations.
B) cash flow from investing and cash flow from operations.
C) cash flow from financing and cash flow from investing.
D) cash flow from investing and cash flow from financing.
Section C
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3. Complete the balance sheet for Waya Inc. Corporation based on the following financial data.
(20 marks)
Balance Sheet
Waya Inc. Corporation as at 31 December 2011
RM
ASSETS:
Current Asset:
Cash 8,005
Marketable securities ?
Accounts receivables ?
Inventory 73,620
Total current assets 159,565
=========
Gross fixed assets ?
(Less) Accumulated depreciation 50,000
==========
Net fixed assets ?
TOTAL ASSETS ?
==========
Liabilities and Stock holders’ equity
Current Liabilities:
Account payable 28,800
Notes payable ?
Accruals 18,800
Total current liabilities ?
=========
Long term liabilities ?
Total Liabilities ?
=========
Stockholders’ Equity:
Preferred stock 2,451
Common stock at par 30,000
Paid in capital in excess of par 6,400
Retained earnings 90,800
Total stockholders’ equity ?
========
TOTAL LIABILITIES AND STOCK ?
HOLDERS’ EQUITY ========
Additional Information:
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4. Total sales RM720,000
Gross profits margin 38.7%
There are 360 days in a year.
Average collection period was 31 days
Current ratio 2.35
Total asset turnover 2.81 times
Debt ratio 49.4 %
Total current assets was RM159,565
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