1. An officer of Westway Corporation recently commented that when he receives the firm’s financial statements, he looks at just the bottom line of the income statement—the line that shows the net income or net loss for the period. He said that he does not bother with the rest of the income statement because “it’s only the bottom line that counts.” He also does not read the balance sheet. Do you think this manager is correct in the way he uses the financial statements? Why or why not?
2. The president of Brown Corporation is concerned about the firm’s ability to pay its debts on time. What items on the balance sheet would help her to assess the firm’s debt-paying ability?
3. Why is it important that a firm’s financial records be kept up-to-date and that management receive the financial statements promptly after the end of each accounting period?
4. What kinds of operating and general policy decisions might be influenced by data on the financial statements?

  • CreatedAugust 08, 2014
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