14.9. Common Terms and Their Meanings

Try these first

1. 1.

   What is an asset?

   Hint

   Think about what the business has.

2. 2.

   Define liability.

   Hint

   Consider debts or loans.

3. 3.

   What is considered an asset in a business?

   • A loan
   • Machinery
   • Insurance

   Hint

   Consider the definition of something owned.

4. 4.

   Liabilities are obligations owed to others. True or False?

   • True
   • False

   Hint

   Think of debts.

5. 5.

   If a company has assets worth $500,000 and liabilities amounting to$200,000, what is its equity?

   Hint

   Remember the main accounting equation.

6. 6.

   A company invests $150,000 in equipment (capital expenditure) and spends$10,000 on monthly rent (operating expenditure). How do these affect their cash flow?

   Hint

   Think about short-term vs. long-term financial impact.