1) When preferred stock has a preference as to dividends, the current year’s preferred
dividend must be paid before a dividend can be paid to common stockholders.
2) The statement of changes in net worth is presented in terms of realized increases
(decreases) and unrealized increases (decreases).
3) Ratios with a primary measure of profitability appear frequently in loan agreements.
4) In order to determine the economic success of a grocery store, we should view it as
separate from the other resources that are owned by this individual.
5) The financial data of the component units are included with the government entities
reporting entity because of the significance of their operational or financial
relationships with the government entity.
6) In the United States, the issue of financial reporting standards for small and
medium-sized entities (SME) has been debated for many years. These debates did not
result in separate standards for SME.
7) Ideally, income from continuing operations would be the better income figure to use
to project the future from the analysis of historical statements.
8) Working capital of a business is the excess of current assets over current liabilities.
9) All intangibles are amortized over their useful lives or their legal lives, whichever is
shorter.
10) Usually, a company must make estimates in the preparation of financial statements
as of a given date.
11) Based on the terms of the credit and the purpose, the objectives of financial
statement analysis by creditors will vary.
12) In practice, the income statement is frequently considered to be the least important
financial statement.
13) In terms of liquidity, it is to management’s advantage to show investments under
investments instead of marketable securities.
14) GASB Statement No. 34 makes it clear that government-wide statements are
considered superior to fund statements.