a) Who is responsible for the preparation and integrity of the financial statements? b) Does the company
Question:
a) Who is responsible for the preparation and integrity of the financial statements?
b) Does the company maintain a system of internal controls? Why?
c) Does the company have an audit committee? ______ What is its purpose?
d) What is the name of the independent public accountant (auditor)?
e) According to the auditor’s report on the financial statements, what is the auditor’s responsibility?
f) According to the audit report, what is an audit?
g) Summarize the auditor’s opinion.
choose a company:
1. The accounting equation is Assets = Liabilities + Stockholders’ Equity. Replacing the words in the accounting equation with dollar amounts, give the company’s accounting equation at the end of the current and prior years.
Assets = Liabilities + Equity
This year _______________ ______________ _______________
Last year _______________ ______________ _______________
2. Calculate the company’s current ratio for both this year and the prior year.
Show your computations.
This year:
Last year: = ___________________ =
Explain what information this ratio provides. (Hint: See the Financial Statement Analysis
chapter of your textbook.) Use complete sentences.
Has the current ratio improved or worsened? Explain. Use complete sentences.
Calculate the company’s debt to total assets ratio (also called total debt to equity) for both this year and the prior year. Show your computations.
This year:
Last year: = ___________________ =
Explain what information this ratio provides. Use complete sentences.
Has the ratio improved or worsened? Explain. Use complete sentences.
3. Compare these ratios to industry averages.
Use the ratios you printed in Assignment 3.
Your company Industry
Current ratio ____________ __________
Debt to equity ratio ____________ __________
How do the results for your company compare to industry averages?
1. Does the format of the statement more closely follow a single-step or a multiple-step format? ________________________________________
How can you tell?
2. Calculate the following ratios for each of the three years presented.
Show your computations.
Current year Last year Two years ago
• Gross profit rate (%) ____________ ____________ ____________
• Ratio of operating ____________ ____________ ____________
expenses to sales (or operating revenue) (%)
• Profit margin (%) ____________ ____________ ____________
Net income/sales or operating revenues
• Return on assets ____________ ____________ ____________
Net income/average total assets
3. Compare these ratios to industry averages. (Note: The gross profit rate may also be called the gross margin. The ratio of operating expenses to sales may also be called the operating margin. The profit margin percentage may also be called the net profit margin.)
Your company Industry
Gross profit rate ____________ __________
Operating margin ____________ __________
Profit margin ____________ __________
Return on assets ____________ __________
How do the results for your company compare to industry averages?
Financial Accounting
ISBN: 978-0133472264
5th Canadian edition
Authors: Charles Horngren, William Thomas, Walter Harrison, Greg Berberich, Catherine Seguin