ACC 291 Week 4 Discussion Questions and Responses Essay

2. List the four basic types of financial ratios used to measure a company’s performance, give an example of each type of ratio and explain its significance.

Fraser, L. M., & Ormiston, A. (201). Understanding financial statements (9th ed.). Upper Saddle River, NJ: Prentice Hall.

investors, auditors, executives of the business, etc.) an overview of the financial results and condition of the company. The major financial statements that come out of the accounting cycle are income statements, balance sheets, Statement of cash flows and Statement of retained earnings. Income statements are considered the most important of all the financial statements since it presents the operating results of an entity , e.g. revenues, expenses, and profits/losses generated during the reporting period (Bragg, 2017). Balance sheets provide reports of assets, liabilities, and equity of the entity as of the reporting date and can be considered the second most important statement because it provides information/figures about the liquidity, as well as the capitalization of a company (Bragg, 2017). Statement of cash flows exhibits the cash inflows and outflows that occur during a reporting period, which provides a useful comparison to the income statement, particularly when the amount of profit or loss reported does not reflect cash flows encountered by the businesses (Bragg, 2017). Statement of retained earnings is the least used financial statement that provides information regarding changes in equity during the reporting period and can include information such as: sale or repurchase of stock, dividend payments, and changes caused by reported profits or losses. Statements of retained earnings are often

There are four major financial statements that investors, creditors, accountants, CEO’s, and the like study when looking at the financial

INCLUDES SOLUTIONS INCLUDES MARKERS’ REPORTS This is a three (3) hour paper. You have ten (10) minutes reading time. There are seven (7) questions. There are eight (8) pages, including this one. You must answer all parts of all questions. The questions are not of equal value. All answers must be written in blue or black ink. Show all relevant working.

2. List the four basic types of financial ratios used to measure a company’s performance, give an example of each type of ratio and explain its significance.

The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of a company during a period in a format that reconciles the beginning and ending cash balances

b. What financial statements are commonly prepared for external reporting purposes? What titles does General Mills give these

While financial ratio analysis does contain limitations that include little theory to guide them as well as the use of accounting data based on historical costs that may not reflect a firm’s true economic conditions, it is an excellent tool

The cash flow statement consists of three parts: cash flows provided by operating activities of $13,831, cash flows provided by investing activities, and cash flows provided by financing activities effect of exchange rate changes on cash and cash equivalents of ($204)

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

The statement of Cash Flows offers insiders and outsiders insight into business fluidity. For example, for an insider the Cash Flow Statement is a tool to ananlyze “dividend policy, cash generated by operations, and investin and financing policy” (394). For an outsider, the Cash Flow Statement assist in analyzing “a firm’s ability to increase dividends, it’s ability to pay debt with cash from operations” and the relation between cash from operations with cash from financing (394). Cash Flow Statements are better short term indicators of performance than income statements. Unlike Incoe Statements, Cahs Flow Statemetns allow analyzers to see the difference between actual exchange of cash, liquidity, than the exchange of non-monetary assets. This is important for two reasons, first we can see if a company is equipped to handle sudden unforeseen events with current assets. A current asset being an asset that can become liquid in a short period (Morning Star, 2012). Second, the Statement of Cash Flows shows how a firm operates on liquid basis. We can see how cash is received and handled from a short term perspective (Morning Star, 2012).

How can financial ratios extend your understanding of financial statements? What questions do the time series of ratios in case Exhibit 7 raise? What questions do the ratios on peer firms in case Exhibits 8 and 9 raise?

asset. Hence, cash flow statement is very important in personal finance because it tells a person

Cash flow statements are usually used to determine the liquidity and solvency of one company. Hence, Focus Point Holding Berhad details out the cash or cash equivalent inflow and outflow of the company