Which one of the following statements is true about an organization's balance sheet? The balance sheet summarizes revenues and expenses for an accounting period. Total assets must equal total liabilities on the balance sheet. The balance sheet shows the financial position of a business on a specific date. Total liabilities minus owners' equity equals total assets on the balance sheet.

The balance sheet shows the financial position of a business on a specific date.

Which one of the following statements about the balance sheet is correct? Change in asset and liability valuation from historical cost to fair value has no effect on the value of shareholders' equity. The balance sheet must always balance, but an exception is that the balance sheet will not balance if net worth is a negative number. Net worth is positive whenever the value of assets exceeds the value of liabilities and negative if the value of liabilities exceeds the value of assets. The balance sheet contains important financial information about net worth and assets, both which indicate the source of an organization's funding.

Net worth is positive whenever the value of assets exceeds the value of liabilities and negative if the value of liabilities exceeds the value of assets.

An important liquidity measure for a business is its working capital. Working capital is equal to Total assets minus total liabilities. Total assets minus current assets. Owners' equity minus current liabilities. Current assets minus current liabilities.

Current assets minus current liabilities.

If an organization directly securitized its income-producing assets without using a special purpose vehicle (SPV), investors Would avoid investing in the organization altogether. Should examine individual borrowers' payments to the organization. Must consider the overall credit risk of the organization. Should not consider the overall credit risk of the organization.

Must consider the overall credit risk of the organization.

Understanding Financial Concepts: Balance Sheets, Risks, and Securitization

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Finance - Personal Finance

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Cards in this deck(20)

Which one of the following statements is true about an organization's balance sheet?

The process of creating a marketable investment security based on the expected cash flows from a financial transaction is known as

One financial risk for an insurer is that the insured will not pay all of the premiums when the premiums are due. This type of risk is called

If interest rates increase, the value of bonds in an insurance company's portfolio will decrease. This risk is called

Jeremy purchased long-term corporate bonds for retirement income. The risk that issuers may become insolvent and unable to make payments is called

Owners' equity represents the capital contributed by an organization's owners plus the organization's

The risk of loss of value when foreign payments are converted to U.S. dollars is called

Which one of the following statements about the balance sheet is correct?

An important liquidity measure for a business is its working capital. Working capital is equal to

If an organization directly securitized its income-producing assets without using a special purpose vehicle (SPV), investors

Which balance sheet ratio would best assist Jones, Inc. in determining if Snack Cracker can pay for the grain within 30 days of the sale?

A major benefit of involving a special purpose vehicle (SPV) in a securitization transaction is that investors can decide whether to invest in the securities based on the

The balance sheet provides a snapshot of an organization's financial condition

A facility established for purchasing income-producing assets from an organization and using those assets to collateralize securities is

The underwriter will use the balance sheet to determine

Which one of the following financial risks is Sixth National Bank facing by not having enough cash on hand to meet the immediate demand?

Which one of the following is an example of a noncurrent liability?

The basic accounting equation on which the balance sheet is structured is

Which one of the following statements is true regarding a generic model of a securitization?

An organization can use securitization to exchange

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