This website uses cookies to ensure you have the best experience. Learn more

Financial Statement Analysis Study Guide

3563 words - 15 pages

Financial Statement Analysis
Financial Reporting & Analysis Questions
Professor Mahoney
Spring 2013

Chapter 1: Introduction to Financial Reporting

I. Questions

2. How does the concept of consistency aid in the analysis of financial statements? What type of accounting disclosure is required if this concept is not applied?

Consistency allows for the same accounting principle from period to period. A change in principle requires statement disclosure.

3. The president of your firm, Lesky and Lesky, has little background in accounting. Today, he walked into your office and said, “A year ago we bought a piece of land for $100,000. This year, inflation has driven prices up by ...view middle of the document...

It is still carried on the books at $40,500. (Historical cost)

g. Zero Corporation is being sued for $1 million for breach of contract. Its lawyers believe that the damages will be minimal. Zero reports the possible loss in a note. (Disclosure)

6. Zebra Company has incurred substantial financial losses in recent years. Because of its financial condition, the ability of the company to keep operating is in question. Management prepares a set of financial statements that conform to generally accepted accounting principles. Comment on the use of GAAP under these conditions.

Generally accepted accounting principles do not apply when a firm does not appear to be a going concern. In this case the liquidation values are the appropriate figures.

7. Because of assumptions and estimates that go into the preparation of financial statements, the statements are inaccurate and are, therefore, not a very meaningful tool to determine the profits or losses of an entity or the financial position of an entity. Comment.

With the time period assumption, inaccuracies of accounting for the entity, short of its complete life span, are accepted. The assumption is made that the entity can be accounted for reasonably accurately for a particular period of time. In other words, the decision is made to accept some inaccuracy because of incomplete information about the future in exchange for more timely reporting. The statements are considered to be meaningful because material inaccuracies are not acceptable.

9. Describe the following terns, which indicate the period of time included in the financial statements:

a. Natural business year

A year that ends when operations are at a low ebb for the year.

b. Calender year

The accounting time period is ended on December 31.

c. Fiscal year

A twelve-month accounting period that ends at the end of a month other than December 31.

14. Inventory that has a market value below the historical cost should be written down in order to recognize a loss. Comment.

Yes, inventory that has a market value below the historical cost should be written down in order to recognize a loss. This is done based upon the concept of conservatism. Losses that can be reasonably anticipated should be taken in order to reflect the least favorable effect on net income of the current period.

15. There are other acceptable methods of recognizing revenue when the point of sale is not acceptable. List and discuss the other methods reviewed in this chapter, and indicate when they can be used.

End of production: the realization of revenue at the completion of the production process is acceptable when the price of the item is known and there is a ready market.

Receipt of cash: this method should only be used when the prospects of collection are especially doubtful at the time of sale.

During production: this method is allowed for long-term construction projects because recognizing revenue on long-term construction...

Other Papers Like Financial Statement Analysis Study Guide

Financial Statement Analysis Of Coca Cola

6958 words - 28 pages Financial Statement Analysis ACG203-CE Marianne Marchant Margaret Pesikov Sean Lenehan Jeff Braga 2 Table of Contents Questions to be answered Management Discussion & Analysis section and Miscellaneous Income Statement and Profitability Cash Flows Balance Sheet Liquidity and Efficiency Solvency 3 3 6 12 14 18 22 Relevant Documents Balance Sheet Income Statement 25 25 26 Evaluation 27 3 Questions to be


1011 words - 5 pages those excellent companies whom have challenged traditional ideas. We intend to show through this case study that any company can follow Harley-Davidson’s techniques and lead them to excellence. Mission Statement “We fulfill dreams through the experiences of motorcycling by providing to motorcyclists and too the general public an expanding line of motorcycles, branded products, and services in selected market segments.” Vision Statement

Indian Rayon Project

9435 words - 38 pages in similar business. Such comparison also helps the management to study the position of their firm in respect of sales expenses, profitability and using capital.etc. 3. EFFICIENCY OF MANAGEMENT The purpose of financial statement analysis is to know that the financial policies adopted by the management are efficient or not. Analysis also helps the management in preparing budgets by forecasting next year‘s profit on the basis of past earnings


7130 words - 29 pages information to investors, creditors, and other external users is through financial statements and related notes. In this chapter you explore important topics such as the FASB’s conceptual framework that serve as a foundation for a more detailed study of financial statements, the way the elements of these statements are measured, and the concepts underlying these measurements and related disclosures. Learning Objectives LO1–1 Describe the function


950 words - 4 pages , examination, and distribution of internal and external information for development of a strategic process. Internal analysis is the first step of environmental scanning. Examinations consist of organizational structure, brand awareness, shareholder interactions, natural resource access, operational potential, and employee interactions with management, and other employees ("Management Study Guide," 2008 - 2013). In strategy formulation factors of a

Managment System In Ptcl

2494 words - 10 pages employee’s yearly salary increment from 20% to 30% in this 20% is basic increment and other 10% will be based on their performance. Data collection: An important contribution of this study is its cross sectional study, this offer a unique insight into the feelings of employees. The research design has adopted questionnaires as well as in-depth interviews. There were three parts of data collection survey; analysis of dissatisfaction data; and

Research Approach For Strat Plan

676 words - 3 pages environment factors influencing the company operations. This paper will begin the strategic planning process for ABC Financial Corporation. The paper will outline the ABC Financial Corporation's research approach that will be used for the strategic plan to validate vision statement as well as the sources that will be utilized in performing an external and internal environmental analysis. The organization’s vision statement “presents a firm’s

Guava Plant

1806 words - 8 pages all the researchers wants to acknowledge the God almighty for the gift of knowledge, courage and patience in accomplishing the study and for making it a success. Thank you also to Mrs.Ferera Oira for lending materials needed for our study and for her pieces of advice; to the researcher’s parents for moral and financial support, to Thelma Caballero, the dentist who prepared and collected calculus needed for our study; Lilia Flores the patient of

Accounting In Sit

4659 words - 19 pages mislead users of accounts? 10 8.0 Cash flow statements 11 9.0 Accounting Ratios and Cash Flow Statement Analysis 11 10. Cash Flow Statement Analysis 14 11. Criticism of traditional financial accounting and problems encountered in inter-firm comparison. 14 12. Contribution list 16 13. References 16 1.0 Introduction T he Sugar Investment Trust (SIT) is a body corporate established under an Act of Parliament in 1994 which operates

Cango Financila Analysis

333 words - 2 pages relative strength and weaknesses vs. CanGo. | Financial Analysis | | 20 | Analysis and recommendations of Can Go’s current financial state, the impact of your recommendations on the company’s finances, any necessary financial planning required. CanGo’s position vs. competition and industry average liquidity, debt, profitability and efficiency ratios – and what they all mean to the company. | Strategic Planning Recommendations | | 20 | Actionable

Toyota Fs Abstract

293 words - 2 pages practices of TFS with the methods used are SWOT matrix, 5 forces of Porter’s and Balanced Scorecard. Based on their financial statement analysis in 2014, the gross interest income increased compared to their last financial statement analysis in 2013. Although Toyota Financial Services has a decreased in net income, it is still one of the trusted brands because of their quality service, timely support, investing in technological advancements and transparent management. Keywords: Toyota Financial Services; leasing; financing

Related Essays

Financial Statement Analysis

2535 words - 11 pages XYZ CONSTRUCTION CO., INC. FINANCIAL STATEMENTS DECEMBER 31,20X1 SAMPLE FINANCIAL STATEMENTS Page 2 Balance Sheet Page 3 Statement of Income and Retained Earnings Page 4 Statement of Cash Flows Pages 5 - 6 Notes to Financial Statements Pages 7 - 13 ACCOUNTANTS' REVIEW REPORT FINANCIAL STATEMENTS SUPPLEMENTAL INFORMATION Schedules of Earnings from Contracts and Contract Costs Page 14

Financial Statement Analysis

372 words - 2 pages Financial statement analysis of Boston Background Profitability review ROI has increased from 19.4% in 2010 to 24.5% in 2010. Balance sheet review For the vertical analysis of balance sheets, the inventory has increased from 10.3% to 12.5%. Meanwhile, percentages of other current assets have little changes. In this case, the percentage of current assets has been raised to 46.1% in 2011, as compared to 43.3% in 2010. The percentage of

Financial Statement Analysis

1138 words - 5 pages disclosures in international security markets Elsevier. doi:10.1016/j.irfa.2007.07.002 Iatridis, G. E. (2011). International review of financial analysis: Accounting disclosures, accounting quality and conditional and unconditional conservatism Elsevier. doi:10.1016/j.irfa.2011.02.013 Penman, S. H. (2013). Financial statement analysis and security valuation (5th ed.). New York: McGraw-Hill Irwin., (2015). Down Down Down For Harvey Norman - Smart House. Retrieved 23 October 2015, from

The Financial Statement Analysis Of Tick Tock

1311 words - 6 pages The report focus on the financial statement analysis of Tick-Tock during 2005 to 2007.And at the same time provides the recommendation whether to purchase Tick-Tock for $275,000 or continue looking for another business. This financial statement has been divided into three segments: profitability, liquidity and financial stability .The first part is profitability which focuses on different aspect of return on investment & evaluating operating