FIN 300 Ch. 3 || Possible Questions Accurately Answered.
Generally Accepted Accounting Principles (GAAP) correct answers The practice and procedure
guidelines used to prepare and maintain financial records and reports authorized by the Financial
Accounting Standards Board
Financial Accounting Standards Board (FASB) correct answers The accounting profession's rule-
setting body which authorizes GAAP
Public Company Accounting Oversight Board (PCAOB) correct answers Non-profit corporation
established by the S-Oxley Act to protect the interests of investors and further the public interest
in the preparation of informative, fair, independent audit reports
Stockholders' Report correct answers Publicly owned corporations with more than 5M and 500K
shares are required by the SEC to provide stockholders with a stockholders' report
Annual report that publicly owned corporations must provide to stockholders; it summarizes and
documents the firm's financial activities during the past year
Letter to Stockholders correct answers The first element of the annual stockholders' report and
the primary communication from management
Four Key Financial Statements correct answers Income Statement, Balance Sheet, Statement of
Stockholders' Equity, Statement of Cash Flows
Income Statement correct answers Provides a financial summary of the firm's operating results
during a specified period
Setup of Statement correct answers Sales Revenue (total dollar amount of sales during the
period)
Less: Cost of Goods Sold
, Gross Profits (amount remaining to satisfy operating, financial, and tax costs)
Less Operating Expenses (Selling, general, admin. lease, depreciation)
Less: Interest expense
Net profits before taxes
Less: Taxes
Net Profits After Taxes
Less: Preferred stock dividends
Earnings available for Common Stockholders
EPS correct answers Earnings Available per Shareholders/Number of Shares of Common Stock
Outstanding
Dividend per Share correct answers The dollar amount of cash distributed during the period on
behalf of each outstanding share of common stock (Dollar amount of divs./number of common
stocks outstanding)
Balance Sheet correct answers Summary statement of the firm's financial position at a given
point in time
It balances assets (what it owns), debt (what it owes) or equity (what was provided by owners)
Short term is current (current assets/liabilities) and are expected to be converted or paid within a
year or less; long term is considered infinite in a life (also called fixed)
Assets are listed from the most liquid (cash); marketable securities are very liquid investments
held by the firm; acc. receivable are monies owed the firm by its customers and credit sales;
inventories are raw materials, work-in-process, and finished goods held; net fixed assets = gross
fixed assets - accumulated depreciation
Generally Accepted Accounting Principles (GAAP) correct answers The practice and procedure
guidelines used to prepare and maintain financial records and reports authorized by the Financial
Accounting Standards Board
Financial Accounting Standards Board (FASB) correct answers The accounting profession's rule-
setting body which authorizes GAAP
Public Company Accounting Oversight Board (PCAOB) correct answers Non-profit corporation
established by the S-Oxley Act to protect the interests of investors and further the public interest
in the preparation of informative, fair, independent audit reports
Stockholders' Report correct answers Publicly owned corporations with more than 5M and 500K
shares are required by the SEC to provide stockholders with a stockholders' report
Annual report that publicly owned corporations must provide to stockholders; it summarizes and
documents the firm's financial activities during the past year
Letter to Stockholders correct answers The first element of the annual stockholders' report and
the primary communication from management
Four Key Financial Statements correct answers Income Statement, Balance Sheet, Statement of
Stockholders' Equity, Statement of Cash Flows
Income Statement correct answers Provides a financial summary of the firm's operating results
during a specified period
Setup of Statement correct answers Sales Revenue (total dollar amount of sales during the
period)
Less: Cost of Goods Sold
, Gross Profits (amount remaining to satisfy operating, financial, and tax costs)
Less Operating Expenses (Selling, general, admin. lease, depreciation)
Less: Interest expense
Net profits before taxes
Less: Taxes
Net Profits After Taxes
Less: Preferred stock dividends
Earnings available for Common Stockholders
EPS correct answers Earnings Available per Shareholders/Number of Shares of Common Stock
Outstanding
Dividend per Share correct answers The dollar amount of cash distributed during the period on
behalf of each outstanding share of common stock (Dollar amount of divs./number of common
stocks outstanding)
Balance Sheet correct answers Summary statement of the firm's financial position at a given
point in time
It balances assets (what it owns), debt (what it owes) or equity (what was provided by owners)
Short term is current (current assets/liabilities) and are expected to be converted or paid within a
year or less; long term is considered infinite in a life (also called fixed)
Assets are listed from the most liquid (cash); marketable securities are very liquid investments
held by the firm; acc. receivable are monies owed the firm by its customers and credit sales;
inventories are raw materials, work-in-process, and finished goods held; net fixed assets = gross
fixed assets - accumulated depreciation
