ACCT 370 Discussion 1
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Feb 20, 2024
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Discussion 1: Importance of Financial Statement Analysis Create a discussion thread that addresses the following areas: •
What is financial statement analysis? •
Why is financial statement analysis an important area of study? •
What is learned from the process of financial statement analysis? •
Discuss the Biblical implications of reliable and representationally faithful financial statements. According to Will Kenton (2022), financial statement analysis is “the process of analyzing a company’s financial statements for decision-making purposes. External stakeholders use it to understand the overall health of an organization and to evaluate financial performance and business value. Internal constituents use it as a monitoring tool for managing the finances.
” According to our text book, external stakeholders include shareholders and investors, customers, lenders and suppliers, and government and regulatory agencies. Internal stakeholders include both managers and employees. (Revsine, et al, 2021, p. 4). Without financial statement analysis, internal and external stakeholders would be left to guess at the health of the organization when making critical decisions about overall business performance and the organization’s value
. The basis for this analysis is the balance sheet, income statement, and cash flow statement. The balance sheet provides a summary of assets, liabilities, and owners’ equity. The income statement (also known as profit and loss statement) summarizes revenue, expenses, profit, and income, for a stated period of time that provides insights into trends and activities for the organization. The cash flow statement shows work of the company’s cash during a specific period of time for three categories of activity: operating, investing, and financing. (Keele University, 2022). The evaluation process allows managers and employees to identify where changes may be required to course-correct unfavorable trends or where we may want to continue actions that are producing favorable results. As external stakeholders we can determine if a company can cover its debts or if a company’s stock price is under or overvalued. The information also allows us to evaluate if the company’s resources are being managed well. From a biblical perspective, financial accounting is supported in a number of ways. First, we are all called to be stewards of the resources that God has entrusted to us. 1 Corinthians 4:2 states, “
Moreover, it is required of stewards that they be found faithful
” (
ESV, 2016). Second, we are given examples of planning and preparing for future costs and decision making in Luke 14:28, “
For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?
” (ESV, 2016). Another example of ethical accounting can be found in Proverbs 11:1, “
A false balance is an abomination to the Lord, but a just weight is his delight
” (ESV, 2016). By providing ethically sound, controlled financial statements, we can account for our management of resources, provide insights in the health of the organization, and plan for the future.
REFERENCES The Holy Bible, English Standard Version. (2016). Bible Gateway, by Crossway Bibles. Keele University. (2022, July 19). Why is Financial Statement Analysis Important? Retrieved from https://online.keele.ac.uk/why-is-financial-statement-analysis-important/
. Kenton, Will. (2022, March 6). Financial Statement Analysis: How It’s Done, by Statement Type
. Retrieved from https://www.investopedia.com/terms/f/financial-statement-analysis.asp Revsine, L., Collins, D. W., Johnson, W. B., Soffer, L. C., & Mittelstaedt, H. F. (2021). In Financial Reporting & Analysis (Eighth Edition). McGraw-Hill Education. Response 1 Hi, Amy. Thank you for sharing your thoughts on our first discussion thread. I’ve enjoyed reading your submission. One of items that stood out to me was your inclusion of using the financial statement analysis as an “early warning system for potential future problems”. If we are not watchful, we can become trapped in our calamity of our own making. Perhaps we took on too much debt or we are not controlling our expenses –
if we are not watchful, we may not see it until it is too late. In Psalm 35:8, David talks about falling into one’s own snare: “Let destruction come upon him when he does not know it! And let the net that he hid ensnare him; let him fall into it
—to his destruction!” (
ESV, 2016). By using the financial statements as warning systems, we can identify the “snares” that we may not even be aware of and devise a way out. The financial statements can be a kind of watch tower for destruction that is waiting for us. I hope you have a wonderful weekend and continue to do well in the course. Tracy REFERENCE The Holy Bible, English Standard Version. (2016). Bible Gateway, by Crossway Bibles. Response 2 Hello, Abby. Thank you so much for sharing your discussion post on the importance of financial statement analysis. Your section on the detrimental impacts of not paying attention to the inflows and outflows is so true. The company that I work for, just went through a major restructuring –
laying off almost 2,000 employees. (Today was my last day at work.) This restructuring was 100% due to lack of controls and awareness on expenses. The company was a startup that experienced tremendous growth between
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Related Questions
What are the latest trends and developments in the field of accounting and finance, and how can organizations leverage them to improve financial management practices? Provide examples to support your answer
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Identify the following statements and match it with the one of the qualitative characteristics of financial statement.
Submitted Answers
Prompts
Choose a match
The information provided to user to determine the
company's growth or future potential
Neutrality
The financial Statements most be produced within a certain
period that users can take advantage of information to make
Predictive Value
informative decision.
Financial Statement is complete, neutral and free of material
O Faithful represented
statement, it means that it is..
Timeliness
The information provided in the financial statement should
not be biased to specific group of users.
arrow_forward
The underlying purpose of the conceptual framework for financial
reporting includes which of the following?
I. increase financial statement users' understanding of and
confidence in financial reporting.
II. enhance comparability amohg companies' financial
statements.
II. allow new and emerging practical problems to be more
quickly solved.
Il only
a.
O b. I, Il and II
Oc. I and II only
O d. Ionly
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Which statement is correct:
Select one:
a.
Management accounting’s focus and emphasis is on past-oriented reports.
b.
The purpose of financial information in management accounting is to communicate organization's financial position to investors, banks, regulators, and suppliers.
c.
All statements are correct.
d.
Management accounting focuses on measuring, analyzing, and reporting financial and nonfinancial information to help managers estimate future revenue, costs, and other measures to forecast activities and formulate strategies to increase the competitive advantage of the organization.
e.
In management accounting, rules of measurement reporting require financial statements, e.g. prepared for the budgeting purpose, to be prepared in accordance of GaAAP.
arrow_forward
s
arrow_forward
PROBLEM
Below is a list of the qualitative characteristics identified in FASB Statement of Financial Accounting Concepts No. 2. Following the list is a series of descriptive phrases.
a. feedback value
b. relevance
c. decision usefulness
d. reliability
e. comparability
f. predictive value
g. varifiability
h. consistency
i. representational faithfulness
j. timeliness
k. neutrality
_____ 1. When information can make a difference in a decision.
_____ 2. Making information available when it is needed.
_____ 3. When accounting policies and procedures are unchanged from period ro period.
_____ 4. When information is verifiable and neutral.
_____ 5. Occurs when the measurement results can be duplicated.
_____ 6. The overall qualitative characteristics accounting information should possess.
_____ 7. When information enables decision makers to confirm prior expectations.
_____ 8. When accounting information is reported the same way by different companies.
Required:
Match each characteristic…
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According to Conceptual Framework, what is the primary objective of financial reporting?
Select one:
Provide information about those investing in the entity
Provide information that is useful to management
Provide information that is useful to those making investing and credit decisions
All of these answer choices are correct
arrow_forward
he underlying purpose of the conceptual framework for financial
reporting includes which of the following?
I. increase financial statement users' understanding of and
confidence in financial reporting.
II. enhance comparability amohg companies' financial
statements.
II. allow new and emerging practical problems to be more
quickly solved.
O a.
Il only
O b. I, Il and III
Oc. I and Il only
O d. I only
arrow_forward
Questions ?
1. What assumptions are made in financial reporting
2. What are characteristics that make financial statements useful to its users ?
3. What are the constraints faced in providing useful information ?
arrow_forward
Analysis relevant to the role of Accounting Theory in Financial Reporting; Issues clearly defined. Links madebetween theory and issues of the project.
arrow_forward
Discuss the descriptive approach in financial accounting theory. What are the limitations of this approach?
“Decision-usefulness approach focuses on the relevance of information being communicated.” Explain this statement.
arrow_forward
Explain the usefulness of Financial statement information to the following stakeholders:
i. Financial Analyst
ii. Employee
iii. Debtors
iv .Government Agency
y s gency
arrow_forward
The Conceptual Framework for Financial Reporting addresses fundamental issues including
Group of answer choices
The objective of financial reporting
All of these
Characteristics that make financial information useful
Definition, recognition, derecognition, measurement, presentation and disclosure of the elements of financial statements
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Conceptual Framework:
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An enhancing qualitative characteristics of financial accounting information is that:
Information must be decision-useful to all potential users of financial reporting.
General-purpose financial reporting is the primary source of information for users.
Users need reasonable knowledge of business and financial accounting matters to understand the information contained in the financial statements.
All of the choices are correct.
arrow_forward
PROBLEM
Below is a list of the qualitative characteristics identified in FASB Statement of Financial Accounting Concepts No. 2. Following the list is a series of descriptive phrases.
a. feedback value
b. relevance
c. decision usefulness
d. reliability
e. comparability
f. predictive value
g. varifiability
h. consistency
i. representational faithfulness
j. timeliness
k. neutrality
_____ 4. When information is verifiable and neutral.
_____ 5. Occurs when the measurement results can be duplicated.
_____ 6. The overall qualitative characteristics accounting information should possess.
_____ 7. When information enables decision makers to confirm prior expectations.
_____ 8. When accounting information is reported the same way by different companies.
Required:
Match each characteristic with the appropiate phrase.
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Disclosure notes are an integral part of the information provided in financial statements. In what ways are thenotes critical to understanding the financial statements and to evaluating the firm’s performance and financialhealth?
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Answer it precisely and clear format
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The qualitative characteristics of relevance, reliability and comparability identified in the IASB’s Framework for the preparation and presentation of financial statements (Framework) are some of the attributes that make financial information useful to the various users of financial statements.Required:Explain what is meant by relevance, reliability and comparability and how they make financial information useful.
arrow_forward
Explain the key functions of financial intermediaries and further discuss the main issues
they address in the financial market. Use academic references or practical examples to
discuss.
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Discuss the four basic Assumptions that underline the financial Accounting Structures with example.
b) Match the qualitative characteristics below with the following statements.
I. Relevance VI. Comparability
II.Faithful representation VII.Completeness
III. Predictive value VIII.Neutrality
IV.Confirmatory value IX.Timeliness
V. Free from error X. Understandability
(i) Quality of information that permits users to identify similarities in and differences between two sets of economic phenomena.
(ii) Having information available to users before it loses its capacity to influence decisions.
(iii) Information about an economic phenomenon that has value as an input to the processes used by capital providers to form their own expectations about the future.
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Which fundamental characteristic of requires that financial statements are prepared in a similar way year after year?
Select one:
a. Faithful representation
b. Understandability
c. Comparability
d. Relevance
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Important components of the financial environment and a developed financial system include:
a. Investment and financial management
b. Financial markets and bond markets
c. Security markets and financial institution
d. Financial institution & markets, investment, and financial management
Please provide me the correct answer and don't reject this question as I need a help on this important question.
&&&&&&&&&&&&#$$$$$$$$$$$$$$$$$$$$$
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How do you distinguish between Financial Reporting for GAAP, and full Disclosure.
What is Management Discussion and Analysis. Access a public company annual report and analyze its MD&A section and how it helps the investors in their decision making process.
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Discuss five ways in which financial professionals can significantly impact the financial statements of an organization by the use of estimates, assumptions, alternative valuation methods and other accepted accounting practices.
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Explain what you understand by the following framework in relation to Financial Reporting process:
Integrated Reporting framework.
Sustainability Reporting and Corporate.
Social Responsibility Report.
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Related Questions
- What are the latest trends and developments in the field of accounting and finance, and how can organizations leverage them to improve financial management practices? Provide examples to support your answerarrow_forwardIdentify the following statements and match it with the one of the qualitative characteristics of financial statement. Submitted Answers Prompts Choose a match The information provided to user to determine the company's growth or future potential Neutrality The financial Statements most be produced within a certain period that users can take advantage of information to make Predictive Value informative decision. Financial Statement is complete, neutral and free of material O Faithful represented statement, it means that it is.. Timeliness The information provided in the financial statement should not be biased to specific group of users.arrow_forwardThe underlying purpose of the conceptual framework for financial reporting includes which of the following? I. increase financial statement users' understanding of and confidence in financial reporting. II. enhance comparability amohg companies' financial statements. II. allow new and emerging practical problems to be more quickly solved. Il only a. O b. I, Il and II Oc. I and II only O d. Ionlyarrow_forward
- Which statement is correct: Select one: a. Management accounting’s focus and emphasis is on past-oriented reports. b. The purpose of financial information in management accounting is to communicate organization's financial position to investors, banks, regulators, and suppliers. c. All statements are correct. d. Management accounting focuses on measuring, analyzing, and reporting financial and nonfinancial information to help managers estimate future revenue, costs, and other measures to forecast activities and formulate strategies to increase the competitive advantage of the organization. e. In management accounting, rules of measurement reporting require financial statements, e.g. prepared for the budgeting purpose, to be prepared in accordance of GaAAP.arrow_forwardsarrow_forwardPROBLEM Below is a list of the qualitative characteristics identified in FASB Statement of Financial Accounting Concepts No. 2. Following the list is a series of descriptive phrases. a. feedback value b. relevance c. decision usefulness d. reliability e. comparability f. predictive value g. varifiability h. consistency i. representational faithfulness j. timeliness k. neutrality _____ 1. When information can make a difference in a decision. _____ 2. Making information available when it is needed. _____ 3. When accounting policies and procedures are unchanged from period ro period. _____ 4. When information is verifiable and neutral. _____ 5. Occurs when the measurement results can be duplicated. _____ 6. The overall qualitative characteristics accounting information should possess. _____ 7. When information enables decision makers to confirm prior expectations. _____ 8. When accounting information is reported the same way by different companies. Required: Match each characteristic…arrow_forward
- According to Conceptual Framework, what is the primary objective of financial reporting? Select one: Provide information about those investing in the entity Provide information that is useful to management Provide information that is useful to those making investing and credit decisions All of these answer choices are correctarrow_forwardhe underlying purpose of the conceptual framework for financial reporting includes which of the following? I. increase financial statement users' understanding of and confidence in financial reporting. II. enhance comparability amohg companies' financial statements. II. allow new and emerging practical problems to be more quickly solved. O a. Il only O b. I, Il and III Oc. I and Il only O d. I onlyarrow_forwardQuestions ? 1. What assumptions are made in financial reporting 2. What are characteristics that make financial statements useful to its users ? 3. What are the constraints faced in providing useful information ?arrow_forward
- Analysis relevant to the role of Accounting Theory in Financial Reporting; Issues clearly defined. Links madebetween theory and issues of the project.arrow_forwardDiscuss the descriptive approach in financial accounting theory. What are the limitations of this approach? “Decision-usefulness approach focuses on the relevance of information being communicated.” Explain this statement.arrow_forwardExplain the usefulness of Financial statement information to the following stakeholders: i. Financial Analyst ii. Employee iii. Debtors iv .Government Agency y s gencyarrow_forward
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SEE MORE QUESTIONS
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Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning