Session:5 Financial Statements
Review Questions
Principles of Finance | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-finance
1. What is the difference between gross profit and net income?
2. If a classified balance sheet has total assets of $900,000 and total owner’s equity of $350,000, what must
the company’s total liabilities be?
3. What key element of the income statement flows through to the balance sheet?
4. What key columns are commonly found on the statement of owner’s equity?
5. Ted’s firm reported net income for the current period of $65,750. Is it safe to assume that because Ted’s
firm reported such a large net income, it has plenty of cash to fund its operations? Why or why not?
6. What useful insights does free cash flow (FCF) provide in financial analysis?
7. Describe how common-size statements are useful.
8. What is the difference between a calendar year and a fiscal year?
2. If a classified balance sheet has total assets of $900,000 and total owner’s equity of $350,000, what must
the company’s total liabilities be?
3. What key element of the income statement flows through to the balance sheet?
4. What key columns are commonly found on the statement of owner’s equity?
5. Ted’s firm reported net income for the current period of $65,750. Is it safe to assume that because Ted’s
firm reported such a large net income, it has plenty of cash to fund its operations? Why or why not?
6. What useful insights does free cash flow (FCF) provide in financial analysis?
7. Describe how common-size statements are useful.
8. What is the difference between a calendar year and a fiscal year?