C214 Financial Management Study Guide with
Solutions | Financial Statements, Cash Flow &
Valuation Verified Questions Complete with A+
Graded Rationales Latest Updated 2026
Trading on the NYSE
Executed without a specialist (i.e. a market maker).
Financial instruments
Stocks and bonds are two types.
Matching Principle
When revenue is matched with cost of sales in an income statement.
Accrual based accounting system reporting
Revenues of $500,000 and Expenses of $300,000.
Net income calculation
Beg RE = 300, NI = 125, Div = -25, End RE = 400.
Balance sheet equation
Equity = Assets - Liabilities.
Balance Sheet
Known as a permanent statement because the other statements are reset at the end of the
fiscal year.
Change in Retained Earnings
Net Income - Dividends.
Operating Income or EBIT
Sales minus Cost of Sales minus other expenses.
Total assets accounts
Cash, Accounts Receivable, Inventory, Long Term Assets.
, Current assets accounts
Inventory, Cash, Accounts Receivable, Short Term Investments.
Total Liabilities accounts
Bonds, Accounts Payable, Mortgage.
Cash flow from operating activities
Calculated as 100,000 + 20,000 - 10,000 = 110,000.
Cash Flow from Financing accounts
Common Stock, Dividends Paid, Bonds Payable.
Statement of Cash Flows
Calculated for the same period of time as the Income Statement and based on the Income
Statement and changes in the Balance Sheet.
Cash flow from investing activities
Calculated as (15,000) since depreciation is not counted when using Gross PPE.
Cash Flow from Operations calculation
450,000 + 110,000 - 120,000 + 90,000 + 50,000 - 75,000 = 505,000.
Cash Flow from Investing calculation
Net End 850 less Net Beg 750 plus Depn 25 = 125 Outflow, resulting in (125,000).
Cash Flow from Investing (second calculation)
Net End 300 - Net Beg 250 + Depn 40 + LT Investments + 100 = 190 outflow, resulting in 190,000
outflow.
Accounts Payable
100,000
Accrued Expenses
50,000
Increase in Mortgage Payable
300,000
Decrease in Bonds Payable
Solutions | Financial Statements, Cash Flow &
Valuation Verified Questions Complete with A+
Graded Rationales Latest Updated 2026
Trading on the NYSE
Executed without a specialist (i.e. a market maker).
Financial instruments
Stocks and bonds are two types.
Matching Principle
When revenue is matched with cost of sales in an income statement.
Accrual based accounting system reporting
Revenues of $500,000 and Expenses of $300,000.
Net income calculation
Beg RE = 300, NI = 125, Div = -25, End RE = 400.
Balance sheet equation
Equity = Assets - Liabilities.
Balance Sheet
Known as a permanent statement because the other statements are reset at the end of the
fiscal year.
Change in Retained Earnings
Net Income - Dividends.
Operating Income or EBIT
Sales minus Cost of Sales minus other expenses.
Total assets accounts
Cash, Accounts Receivable, Inventory, Long Term Assets.
, Current assets accounts
Inventory, Cash, Accounts Receivable, Short Term Investments.
Total Liabilities accounts
Bonds, Accounts Payable, Mortgage.
Cash flow from operating activities
Calculated as 100,000 + 20,000 - 10,000 = 110,000.
Cash Flow from Financing accounts
Common Stock, Dividends Paid, Bonds Payable.
Statement of Cash Flows
Calculated for the same period of time as the Income Statement and based on the Income
Statement and changes in the Balance Sheet.
Cash flow from investing activities
Calculated as (15,000) since depreciation is not counted when using Gross PPE.
Cash Flow from Operations calculation
450,000 + 110,000 - 120,000 + 90,000 + 50,000 - 75,000 = 505,000.
Cash Flow from Investing calculation
Net End 850 less Net Beg 750 plus Depn 25 = 125 Outflow, resulting in (125,000).
Cash Flow from Investing (second calculation)
Net End 300 - Net Beg 250 + Depn 40 + LT Investments + 100 = 190 outflow, resulting in 190,000
outflow.
Accounts Payable
100,000
Accrued Expenses
50,000
Increase in Mortgage Payable
300,000
Decrease in Bonds Payable
