Financial Management: Principles and Applications, 13/e

Study Questions

1. 3–1. Describe the content of the balance sheet and the income statement.

2. 3–2. Firm income statements document the revenues earned and the expenses incurred in generating those revenues during the period covered. However, firm expenses are categorized into one of three groups: cost of goods sold, operating expenses, and interest expense. By deducting each of these categories of expenses from firm revenues, we compute three types of profits. What are they and how are they different?

3. 3–3. From the firm’s perspective, how are cash dividends different from interest payments?

4. 3–4. When bank loan officers are evaluating the creditworthiness of a potential commercial borrower, they often look to the firm’s net working capital balance ...