Which statements describe the principal reason(s) whyinvestors and creditors use financial statement analysis? 1. Toassess the risks associated with expected returns 2. To establishrecommended dividend and interest payments 3. To evaluate top andmiddle level management 4. To predict the amount of expectedreturns

A.		3 and 4
B.		1 and 2
C.		1, 2, and 3
D.		1 and 4

Financial statements are helpful to predict the futureperformance of a company for all of the following reasons except_____.

A.		the evaluation of management's past performance gives clues toits ability to generate future returns
B.		past performance is often a good indicator of futureperformance
C.		the assets and liabilities of a company provide clues to acompany's future prospects
D.		financial statements are required to give formal projections ofmanagement's assessment of the next period's financial results

Identify which one of the following statements isfalse.

A.		Assets are economic resources that are expected to benefitfuture cash inflows or reduce future cash outflows.
B.		Assets must always equal the sum of liabilities andowners equity.
C.		Liabilities are economic obligations or claims against theassets of an organization by outsiders.
D.		Owners equity solely represents the profits made by anorganization in the current period.