Chapter 3

1. Describe the purpose of the balance sheet.
   1. What are the benefits and limitations?
2. Be able to identify and describe the elements of the balance sheet.
   1. Assets current assets, long-term assets, property, plant & equipment, intangibles
   2. Liabilities current liabilities, long-term debt
   3. Stockholders Equity contributed capital and retained earnings
3. Distinguish between current and noncurrent assets and liabilities.
   1. Define operating cycle
4. Identify what accounts (or amounts) go into Cash and Cash Equivalents.
5. Be able to calculate the components of the balance sheet (total current assets, total property, plant and equipment, total current liabilities, total long-term liabilities, total stockholders equity).
6. Explain what is meant by Disclosure Notes.
7. Identify the other parts of a companies annual report.
   1. Management Discussion and Analysis
   2. Compensation of Directors and Top Executives
   3. Independent Auditors Report
8. Explain financial analysis tools and techniques and purpose (what they measure).
   1. Horizontal analysis
   2. Vertical analysis
   3. Ratio analysis purpose and calculate
      1. Liquidity ratios Current ratio, quick ratio
      2. Solvency ratios Debt to equity, Times earned interest

Chapter 4

1. Describe the purpose of the income statement.
2. Identify the elements on the income statement (revenues, expenses, gains, losses).
3. Identify the component of a multiple-step income statement.
4. Describe why nonrecurring expenses are separately stated. Give examples.
5. Know what is meant by earnings quality.
6. Describe a discontinued operations and how this event is reported on the income statements including income tax effect.
7. Calculate earnings per share.
8. Reporting changes in accounting principle and accounting for errors.
9. Define and compute comprehensive income and reporting options.
10. Define statement of cash flow and identify the three major cash flow activities.