Question

In: Finance

Which of the following statements is CORRECT?

 Which of the following statements is CORRECT?

 a. The balance sheet for a given year is designed to give us an idea of what happened to the firm during that year.

 b. The balance sheet for a given year tells us how much money the company earned during that year.

 c. The difference between the total assets reported on the balance sheet and the liabilities

 reported on this statement tells us the current market value of the stockholders' equity, assuming the statements are prepared in accordance with generally accepted accounting principles (GAAP).

 d. If a company's statements were prepared in accordance with generally accepted accounting principles (GAAP), the market value of the stock equals the book value of the stock as reported on the balance sheet.

 e. The assets section of a typical company's balance sheet begins with cash, then lists the assets in the order in which they will probably be converted to cash, with the longest lived assets listed last.


Solutions

Expert Solution

The correct answer is Option A

The Balance sheet is prepaid on yearly basis and it shows the assets and the liabilities of the company, it is a useful financial statement that is used by stockholders to estimate the changes made by firm periodically.

The Book value of equity is calculated by Subtracting liabilities from assets and Income statement shows how much money company has made. Therefore, Option B and C are wrong.

The GAAP and IFRS considers Book value of equity as accepted and the Assets in balance sheet are arranged accroding to current assets and Fixed assets.


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