The financial statements for Oros Riding Club, Inc. follow. 

Required 

1. Explain how the four statements for Oros Riding Club, Inc., are related to each other. 

2. Which statements are most closely associated with the goals of liquidity and profitability? Why? 

3. If you were the owner of this business, how would you evaluate the company’s performance? Give specific examples. 

4. If you were a banker considering Oros Riding Club, Inc. for a loan, why might you want the company to get an audit by an independent CPA? What would the audit tell you?

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Oros Riding Club, Inc. Income Statement For the Month Ended November 30, 2010 Revenues Riding lesson revenue Locker rental revenue $4,650 1,450 Total revenues $6,100 Expenses Salaries expense Feed expense Utilities expense Total expenses Income before income taxes $1,125 750 450 2,325 $3,775 600 $3,175 Income taxes expense Net income Oros Riding Club, Inc. Statement of Retained Earnings For the Month Ended November 30, 2010 Retained earnings, October 31, 2010 Net income for the month Subtotal Less dividends $5,475 3,175 $8,650 2,400 $6,250 Retained earnings, November 30, 2010 Oros Riding Club, Inc. Balance Sheet November 30, 2010 Liabilities Assets $ 6,700 Cash Accounts payable $13,350 Accounts receivable 900 Stockholders' Equity Supplies Land 750 Common stock $34,500 15,750 22,500 Building Horses Retained earnings Total stockholders' equity 6,250 7,500 40,750 Total liabilities and Total assets stockholders' equity $54,100 $54,100 Oros Riding Club, Inc. Statement of Cash Flows For the Month Ended November 30, 2010 Cash flows from operating activities Net income $3,175 Adjustments to reconcile net income to net cash flows from operating activities Increase in accounts receivable Increase in supplies Increase in accounts payable Net cash flows from operating activities ($ 400) (550) 400 (550) $2,625 Cash flows from investing activities ($1,000) 2,000 Purchase of horses Sale of horses Net cash flows from investing activities 1,000 Cash flows from financing activities Issue of common stock $5,000 (2,400) Payment of cash dividends Net cash flows from financing activities 2,600 Net increase in cash $6,225 Cash at beginning of month Cash at end of month 475 $6,700