Financial Statement Analysis

4339 WordsNov 19, 201218 Pages
Chapter 2 Introduction to Financial Statement Analysis 2-1. What are the four main financial statements? What checks are there on the accuracy of these statements? The four financial statements are: the balance sheet, the income statement, the statement of cash flows, and the statement of changes in shareholders’ equity. Financial are required to be audited by a neutral third party, who checks and ensures that the financial statements are prepared according to GAAP or accounting standards and that the information contained is reliable. 2-2. Who reads financial statements? List at least three different categories of user. For each category, provide an example of the type of information they might be interested in and…show more content…
2-5. What was the change in Nokia’s book value of equity from 2006 to 2007 according to Table 2.1? Does this imply that the market price of Nokia’s shares increased in 2007? Explain. Nokia’s book value of equity increased by €5,278 million from 2006 to 2007. An increase in book value does not necessarily indicate an increase in Nokia’s share price. The market value of a share does not depend on the historical cost of the firm’s assets, but on investors’ expectation of the firm’s future performance. There are many events that may affect Nokia’s future profitability, and hence its share price, that do not show up on the balance sheet. 2-6. Use EDGAR to find Qualcomm’s 10K filing for 2009. From the balance sheet, answer the following questions: a. How much did Qualcomm have in cash and short-term investments? b. What were Qualcomm’s total accounts receivable? c. What were Qualcomm’s total assets? d. What were Qualcomm’s total liabilities? How much of this was long-term debt? e. What was the book value of Qualcomm’s equity? a. $2,717 million (cash) and $8,352 million (short-term investments/marketable securities) for a total of $11,069 million b. $700 million c. $27,445 million d. 7,129 million, nothing e. $20,316 million 2-7. Find online the annual report of Cadbury from www.cadburyinvestors.com for 2007. Answer the following questions from their balance
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