Financial Reporting Problem : Malcolm Stokes

The remainder of this note discusses each of the steps in the process and then provides an exercise on the various financial measures that are useful as part of the analysis. The final section of the note demonstrates the relationship between a firm’s strategy and operating characteristics; and its financial characteristics.

In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial

As a creditor or lender it is of utmost importance that they have all the information necessary to make a sound decision as to whether or not they will lend money to a company. The retained earnings statement, balance sheet, and statement of cash flows will paint that picture for a creditor due to the fact that they will see where the company’s money is being earned and spent through the statement of cash flows, they will see how they are either paying out dividends to investors or reinvesting the money into the business through the retained earning statements, and how solvent the business is by looking at the balance sheet.

Determine the impact of the company’s mission, vision, and primary stakeholders on its overall success.

Understanding the finances of a company is important but knowing the significance of the financial statements is crucial to the operations as well. Reviewing the statement of financial position, operating statement and statement of cash flows serve as a guidance to management and executives on the day-to-day activities of an organization (Finkler et al., 2013). For example, the statement of financial position (balance sheet) shows the assets and

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.

Liquidity, solvency, and profitability are the three characteristics that will be used to see a company’s success. A simple financial statement will not

The purpose of this report is to analyze Target Corporation’s financial statements, determine the future growth potential of the company, and make a recommendation for or

Among the tools required for every business to survive and thrive, the ability to maintain a regular self-examination holds an indispensable place. The size of the business in question is almost of no consequence, only the potential complexity of the self-examination changes. A prime tool for such self-examinations is the family of related financial reporting that has become nearly universal in western businesses: the income statement, the balance sheet, and the statement of cash flows. This trio of reports enables management and owners to carefully examine the holdings and liabilities of their business so they may make

Cash equivalents are described as safe investments that contain low amount of risks in which the result is virtually ensured. In most cases, there is a tendency to easily convert cash equivalents into cash, which may be used as collateral in certain cases. Notably, there are various kinds of investments that can be appropriately identified as cash equivalents. Some of the best examples of cash equivalents are interest bearing investments in which money market funds and Treasury bills are the most common type of asset. Short-term municipal bonds are also considered as cash equivalents, particularly those with a maturation period of approximately three months. Around the home, some financial instruments, money orders, and checks awaiting redemption can be understood as cash equivalents in some cases. The major advantages of cash equivalents include the fact that they are easily negotiable and easy to convert into cash and their ability to make it possible to buy goods and services without using credit cards or carrying cash ("What are Cash Equivalents?" n.d.).

Because liability is a company obligation it must be reported in to the balance sheet. Balance sheet is part of the financial statement that is essential for an investor. It is important to include the $4,000,000 out standing balance to the balance sheet as a part of the company liabilities. The detail of this loan should be disclose to the investor indicate that the company have additional line of credit of the $11,000,000 available. The company also needs to clarify that this line of credit is base on the 80% of the company account receivable. Disclosing this information clarified the company future outflow. This information will help investor to analyst and predict the company future earning and

Kieso, Weygandt, and Warfield (2013) discuss that components that are characteristic to cash and its equivalents entail funds that are readily available and short-term investments that can be turned into monetary value quickly (p. 346). The SBUX Annual Report for the year 2014 relates the following statement:

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

Stakeholders include but are not limited to employees, investors, and lenders. Therefore, to have a well-informed and well-rounded opinion, it helps to have accurate and up to date financial statements and ratio distribution of the company’s revenue. With the statements, it not only shows the current position of the company but gives insight to determine the best decisions in the running of the company. In regards to lenders, financial statements are the antithesis of the lending criteria used to calculate any monies the company may or may not receive. This calculation is important in estimating the average amount of money that they can lend the organization, and the amount can be paid after a certain period taking into account the rate of interests (Cummings & Worley, 2009).

Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look at these statements to make sure their investment will return a profit for them. This paper will look at four different companies and their balance sheets and income statements. The companies are Eastman Chemical Company, Covenant Transportation