The focus on financial statements in finance is how managers and investors interpret and use them. A firm's annual

report contains both verbal and quantitative information. The quantitative information consists of four financial statements: $(1)$

Balance Sheet, $(2)$ Income Statement, $(3)$ Statement of Cash Flows, and $(4)$ Statement of Stockholders' Equity.

The balance sheet shows the firm's assets and claims against those assets. In other words, assets are equal to liabilities and

equity. Assets are shown in order of their $($balance$/$liquidity$/$importance$)$ Blank $1$ and claims are listed in the order of when they

must be paid. Current assets include cash and their equivalents, accounts $($payable$/$receivable$/$accrual$)$ Blank $2.$ and inventory,

while long$-$term assets are those whose useful lives exceed one year. Liabilities are divided into $($current assets$/$notes

payable$/$current liabilities$)$ Blank $3$ and long$-$term debt. We differentiate between total debt and total liabilities. A company's total

debt includes both its short$-$term and long$-$term $($noninterest$-$bearing$/$interest$-$bearing$)$ Blank $4$ liabilities. Total liabilities

equal $($current liabilities$/$total debt$/$total equity$($ Blank $5$ plus the company's "free" liabilities. $($Net working capital$/$Net fixed

assets$/$Net current liabilities$)$ Blank $6$ is the difference between current assets and current liabilities, while $($net operating current

liabilities$/$net operating working capital$/$net non$-$operating current liabilities$)$ Blank $7$ is equal to current assets less the difference

between current liabilities and notes payable. $($Net income$/$Operating income$/$Net worth$)$ Blank $8$ is capital supplied by common

stockholders and represents ownership.