Who are the main users of accounting information and financial statements? Explain the accounting equation and double-entry
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- Who are the main users of accounting information and financial statements?
- Explain the accounting equation and double-entry bookkeeping.
- Knowing what you do now about accounting and financial management, take a look at a recent annual report for a Fortune 100 or 500 company. What are some of the key observations you make from reading through this report? (FYI: these reports can often be more than 100 pages. I do not expect nor do I recommend that you read the entire thing. Rather, I want you to over the report to become familiar with what they entail and make some observations from what you read). What was the reported net income for the year you are looking at? Was this above or below what they were projecting? Do you see anything in the report that would indicate why or why not the projected income was reached? Annual financial reports are public documents for these companies, so you will all be able to find these reports. Additionally, look at the current financial information for your company in places like the stock market and Fortune.com. Is this information consistent, better, or worse than what you gleaned from the annual report? What does this tell you about your company?
- Calculate and analyze the current and quick (acid-test) ratios of different businesses. Business 1: Small Town Memories, a small gift shop, has current assets of $45,000 (including inventory valued at $30,000) and $9,000 in current liabilities. Business 2: TrendyTees, a specialty clothing store, has current assets of $150,000 (including inventory valued at $125,000) and $85,000 in current liabilities. Both businesses have applied for loans. Click the Calculators box on the toolbar at www.bankrate.comand then click on small businesses to answer the following questions.
- Calculate the current ratio for each company. Which company is more likely to get the loan. Why?
- The acid-test ratio subtracts the value of the firm's inventory from its total current assets. Because inventory is often difficult to sell, this ratio is considered an even more reliable measure of a business's ability to repay loans than the current ratio. Calculate the acid-test ratio for each business and decide whether you would give either loan. Why or why not
Related Book For
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton
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