Question 1

What are the limitations of financial statements?

Accepted Answer

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Question 2

It is possible for two companies to have the same financial performance,but their financial statements can be different,depending on how and when the managers choose to report certain transactions.

Accepted Answer

Two companies may have the same financial performance, but their financial statements can be different based on different accounting methods, timing of transactions, and other reporting decisions made by managers.

Question 3

Cash flows between investors and the firm,what we call financing cash flows,occur in one of four ways EXCEPT:
A) Pay stock dividend.
B) Pay interest to lenders.
C) Pay dividends to stockholders.
D) Increase or decrease interest-bearing debt.

Accepted Answer

The four ways in which financing cash flows occur are paying interest to lenders, paying dividends to stockholders, increasing or decreasing interest-bearing debt, and issuing or repurchasing stock. Paying stock dividends is not one of the ways in which financing cash flows occur, as stock dividends are a distribution of a company's profits to its shareholders and do not involve a transaction between the company and investors.

Question 4

Computing the change in long-term assets or net capital spending,it involves computing the change in net fixed assets and other long-term assets.

Accepted Answer

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Question 5

How is taxable income computed?

Accepted Answer

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Question 6

In the United States,financial statements are prepared following the Financial Accounting Standards Board's generally accepted accounting principles (GAAP).

Accepted Answer

It is true that financial statements in the United States are prepared following GAAP. GAAP provides a framework for consistent and transparent financial reporting, ensuring that investors and stakeholders have accurate and reliable information about a company's financial performance.

Question 7

Why should we be more concerned with the marginal tax rate rather than the average tax rate?

Accepted Answer

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Quiz 3: Understanding Financial Statements and Cash Flows