FIN400 Final Exam

1. This is a closed book exam. You may only have pens, pencils and a calculator at

When you’re looking at the income statement, you can get information about profitability for a particular period. This is also called the profit and loss statement. The income statement is composed of both income and expenses. This statement can be used to deduct expenses from income and report either a net profit or net loss for that period. This statement will deduct all expenses from income and then report your net profit or net loss for that period. This will allow the business owner to determine if the business is bringing in a good amount of revenue to make a profit. The cash flow statement shows the movement in cash and balance over period. The cash flow can vary depending on the operating activities, investing and financing activities. This statement provides one business owner with insight to the company’s liquidity which is vital to the growth of the business. Reinvesting in business is very important, looking at the statement of retained earnings will tell a business owner how much were reinvested in the company. After profitable period, every big business has to give some of its profits to stockholders, and keep the rest amount as retained earnings. Out of all statements, retaining statement is important to companies that sells stocks to the public. This statement can also provide you with assets and liabilities information. These informations can be used to assess the financial health of your business. The results of a balance sheet will help the business owners to show the risk of liquidity and credit. Looking at these information you can measure trends and relationships to show where in the areas you can improve. These can also be compared to similar companies to show how the business measures up to leading competitors (Ali, 2010). In summary, the financial statements can provide a business owner

* An income statement is a report that contains information in regards to an organizations’ assets and financing in order to obtain those assets that is collected over a certain period of time

They way the investors would benefit from our ratio tables, is by looking at and comparing Profitability ratios by comparing Profit margins, return on equity or by comparing solvency ratios such as debt ratio and equity ratios with the other companies being presented in our research analysis. For more detailed information they can check the balance sheets and income statements that are being portrayed in the report and look at the progress of the companies within the last four years. Therefore, helping make their decisions easier and faster.

uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company 's manufacturing overhead data:

Sonja is seriously injured in an auto accident. After six months, she is still unable to return to work. She has no income from her job, and the insurance premium payments are financially burdensome. In this case Sonja has an ordinary life insurance with the waiver-of-premium attached so after six months all premiums would be waived if Sonja is totally disabled. Under some policies, a retroactive refund of the premium paid during the first six months would be paid. (Rejda, George, McNamara, 2014).

Users are likely interested in information that will assess the company's liquidity, solvency, risk and return, etc. Therefore, they can know more about how is the company financed and the availability of cash to pay debt from the balance sheet. They can know exactly about allocation of the use of cash for different activities from the statement of cash flows. Income statement will provide the information about the revenues and expenses of the company. They can also access information associated with dividend paid and retained earnings.

The DuPont Analysis is a type of analysis that provides a more detailed look at a company's Return on Equity (ROE) by breaking it into three main components. The three components are profit margin, asset turnover and a leverage factor. By separating the ROE into these smaller categories, investors can quickly identify how effectively or efficiently a company is using their resources. If any of the three categories is performing poorly then this can lower the overall figure. To calculate a firm's ROE through Du Pont analysis, multiply the profit margin (net income divided by sales), asset turnover (sales divided by assets) and leverage factor (total assets divided by shareholders' equity) together - the higher the result, the higher the return on equity.

Income statements generally report on a period matching the standard accounting periods of the business, or may cover a specific period as defined for research purposes. At the core, the income statement provides a key measure of the profitability of a business. This differs from the liquidity or cash on hand of a business, but instead examines the business’ ability to bring in revenues that exceed expenses over a given period of time (Hofstrand, 2009).

While inaccurate accounting can cause misleading information about the company, every successful company should develop an income statement and balance sheet when monitoring financial growth. Also, formulating a horizontal and ratio analysis creates an accurate trend of the company spending behavior and debt-to-ratio venerability. A balance sheet can be considered as the bloodline of the company, allowing a quick view of financial fluency which could be attractive to outside investors. Last but not least, the income statement presents a hard result of gains, liabilities, revenues and debt within a yearly

The Balance Sheet is another type of financial statement used by a company to see a snapshot of the company's financial position at a particular point in time. It lists the value of the company's assets followed by its liabilities. A balance sheet can be summed up by a simple equation:

Ans: The income statement lists the revenues minus expenses or costs of goods sold and operating expenses and will reveal a net income or net loss (Revenues – Expenses = Net Profit or Net Loss). Income statements show how much money a company made and spent over a period of time. Income Statements cover a specified period of time usually annually or quarterly. An Income Statement represents only one limited view of the companies’ net profits or net loss after all revenues are listed while expenses (costs) and taxes are subtracted. The Income

Accountants also ensure that organized financial statements are put out so that their company’s investors and lenders can accurately evaluate how a business is doing. One of the fundamental financial statements is the balance sheet. This

According to Hermanson, R., Maher, M., & Edwards, J. by definition an income statement “is a financial statement that shows cases a companies’ profitability during a set period”. How that profitability is measure is by comparing the revenues earned with the expenses incurred to produce these revenues. If the production of these revenues exceed the expenses that they incurred than the company has gained a net income and if the expenses incur were to exceed the revenue than the company has suffered a net loss.

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).