1. Statement of cash flows separates the balance sheet (cash inflows and outflows) according to management, financing, and debt activities of the firm.

_____ 2. Financial control is the process of measuring and monitoring the business performance over time in order to maintain desired standards of performance.

_____ 3. In selecting measures to reflect the firms profitability, liquidity, efficiency, and risk, the decision maker should choose measures that are both cashweight and cumbrous.

_____ 4. Cash accounting is the practice of recording income or expense when cash changes hands. Sales recorded when cash is received and expense recorded when cash is paid.

_____ 5. Common-size statement is a companys financial statement that displays all items as percentages of a common base figure.

_____ 6. In financial analysis, index-number trend series method is usually recommended when a comparison of financial statements covering more than two years is involved.

_____ 7. Repayment capacity refers to the anticipated ability of the borrower to generate sufficient cash to repay a loan plus interest according to the terms established in the loan contract.

_____ 8. Leverage ratio is the process of measuring and monitoring the business performance over time in order to maintain desired standards of performance.

_____ 9. EBITDA is measure of a company's ability to produce income on its operations in a given year.

_____ 10. A typical accrual accounting occurs when sales are recorded when cash changes hands and expense recorded regardless of when incurred, received or paid.

_____ 11. The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc.

_____ 12. Current ratio should always be greater than one showing that the firm can meet current liabilities.

_____ 13. A business with computed leverage (or debt-to-equity) ratio of 1.20 is just using one dollar of debt for every $1.20 of equity capital.

____ 14. Solvency and coverage and repayment capacity refer to the firms ability to meet total claims against the business.

_____15. Liquidity measures allow the firm to assess changes in profits relative to the condition of other financial measures.

_____ 16. A farm business is solvent when the sale of all assets fails to generate sufficient cash to pay off all liabilities.

True and false