1. The ____________________ presents the financial results of a business for a stated period of time; specifically, it quantifies the amount of revenue generated and expenses incurred by an organization during a reporting period, as well as any resulting net profit or loss.

a. income statement

1. 2. statement of retained earnings
   3. balance sheet
   4. statement of cash flows
   5. none of the above
2. On the statement of cash flows, cash outflows arise from _____ assets, ________ liabilities, and ___________ stockholders' equity.
   1. increasing; increasing; decreasing
   2. increasing; decreasing; decreasing
   3. decreasing; increasing; increasing
   4. decreasing; increasing; decreasing
   5. increasing; increasing; increasing
   6. decreasing; decreasing; decreasing
   7. none of the combinations listed above are correct.
3. Which of the following should be added to net income + depreciation when constructing a statement of cash flows using the indirect method? Choose ALL that apply (this is an all or nothing question you must correctly choose all correct answers to receive any credit for this question).
   1. Increase in an asset account that is related to an account on the income statement.
   2. Decrease in an asset account that is related to an account on the income statement.
   3. Increase in a liability account that is related to an account on the income statement.
   4. Decrease in a liability account that is related to an account on the income statement.
   5. None of the above.
4. In conducting a common-size balance sheet analysis, every account on the balance sheet is divided by

5. __________

6. 1. its corresponding base year balance sheet item.
   2. its corresponding base year income statement item.
   3. net sales or revenues.
   4. total assets.
   5. total liabilities.
   6. None of the above.
8. The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)
   1. account payable.
   2. account receivable.
   3. revenue.
   4. expense.
   5. None of the above.
10. Which group of ratios measure a firm's ability to meet short-term obligations? a. Liquidity ratios.
    2. Debt ratios.
    3. Coverage ratios.
    4. Profitability ratios.
    5. Activity ratios.
    6. None of the above.
11. Which of the following would increase a companys current ratio (note: assume that the companys current ratio is presently equal to 2.0)? Choose ALL that apply (this is an all or nothing question you must correctly choose all correct answers to receive any credit for this question).
    1. Increase notes payable (i.e., borrow short term) to finance additional fixed assets.
    2. Issue long-term debt to buy inventory.
    3. Sell common stock to pay off the companys notes payable balance.
    4. Sell fixed assets to reduce accounts payable.
    5. Implement a just-in-time inventory policy that reduces the companys average inventory balance by 50 percent. The reduction in inventory will be matched with an equal decrease in accounts payable.
    6. An increase in annual sales that increases the companys accounts receivable balance. This increase in accounts receivable will be matched by an equal increase in notes payable.
13. Assume that for a given firm, the gross profit margin in 2021 was equal to the gross profit margin in 2020, but the net profit margin in 2021 was lower than the net profit margin in 2020. This could have happened if __________.
    1. The companys cost of goods sold increased in 2021 relative to sales.
    2. The companys sales increased in 2021 relative to expenses.
    3. The U.S. Congress increased the tax rate in 2021.
    4. The company decreased dividends paid to common stockholders in 2021.
    5. The company increased the number of shares of common stock outstanding in 2021.