1. What is the LIFO reserve, and why would an analyst be careful in interpreting the earnings of a company that has liquidated some of its LIFO reserve? 2. Under what section should accounts receivable be reported on the balance sheet?
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1. What is the LIFO reserve, and why would an analyst be careful in interpreting the earnings of a company that has liquidated some of its LIFO reserve?
2. Under what section should accounts receivable be reported on the balance sheet?
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Solved in 2 steps
- Why might some liabilities not be reported on the balance sheet? Why would a company look to have some liabilities not reported on its balance sheet?1. What is the general trend of the company’s current assets? Did you observe any account with significantfluctuations? What could be the reason for this?2. What is the general trend of the company’s noncurrent assets? Did you observe any account withsignificant fluctuations? What could be the reason for this?3. What is the general trend of the company’s current liabilities? Did you observe any account withsignificant fluctuations? What could be the reason for this?4. What is the general trend of the company’s noncurrent liabilities? Did you observe any account withsignificant fluctuations? What could be the reason for this?5. What is the general trend of the company’s equity? Did you observe any account with significantfluctuations? What could be the reason for this?I. What are terms of credit? From the viewpoint of a short-tent creditor, why do lines of credit increase a company's liquidity? How arc the unused portions of these lines presented in financial statements? 2. Why are investments in marketable securities shown separately from cash equivalents in the balance sheet?
- Explain why the following statement is true: “The retained earningsaccount, as reported on the balance sheet, does not represent cashand is not available for the payment of dividends or anything else.”Which of the following is true if a company reports an unrealized increase in fair value of available-for-sale securities using an allowance account? The spreadsheet and statement of cash flows do not reflect this transaction. The spreadsheet accounts for this transaction, but it is not reflected in the statement of cash flows. The spreadsheet does not account for this transaction, but it is reflected in the statement of cash flows. Both the spreadsheet and the statement of cash flows reflect this transaction.Why are most decision makers particularly concerned about the amount of current liabilities reported by a company?
- What are lines of credit? From the viewpoint of a short-term creditor, why do lines of credit increase a company’s liquid-ity? How are the unused portions of these lines presented in financial statements?Under standard accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs,the owners’ equity is negative. Can this happen with market values? Why or why not?If a company uses a non-GAAP fi nancial measure in an SEC fi ling, then the companymust:A . give more prominence to the non-GAAP measure if it is used in earnings releases.B . provide a reconciliation of the non-GAAP measure and equivalent GAAP measure.C . exclude charges requiring cash settlement from any non-GAAP liquidity measures.
- 4 . Both accounts payable and deferred revenue are classifi ed as current liabilities. Discuss the following statements: A . When assessing a company’s liquidity, the implication of amounts in accounts payable diff ers from the implication of amounts in deferred revenue. B . Some investors monitor amounts in deferred revenue as an indicator of future revenue growth.How is the short term debt repayment capacity of a company is assessed ? Choose the INCORRECT OPTIONa) Current Ratio is analyzedb) Liquidity Ratios and the Cashc) Quick Ratio is analyzedd) The statement of Cash Flows is analyzedExplain whether each of the following balance sheet items increases, reduces, or has no directeffect on a company’s ability to pay its obligations as they come due. Explain your reasoning.a. Cash.b. Accounts Payable.c. Accounts Receivable.d. Capital Stock.