The financial statements for the Oros Riding Club follow.

Required

1. Explain how the four statements for Oros Riding Club relate 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 for a loan, why might you want the company to be audited by an independent CPA? What would the audit tell you?

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Oros Riding Club Income Statement For the Month Ended November 30, 2011 Revenues Riding lesson revenue Locker rental revenue Total revenues $4,650 1450 $6,100 $1,125 750 Salaries expense Feed expense Utilities expense Total expenses Net Income 3,775 Oros Riding Club Statement of Owner's Equity For the Month Ended November 30, 2011 Owner's capital, October 31, 2011 Investment by owner Net income for the month Subtotal Less withdrawals Owner's capital, November 30, 2011 35,475 6,000 3,775 $45,250 2,400 $42,850 Oros Riding Club Balance Sheet November 30, 2011 Liabilities Cash Accounts receivable Supplies Land Building Horses Total assets 6,700 Accounts payable $11,250 Owner's Equity 750 15,750 22,500 7,500 S54,100 Owners capital 42,850 Total liabilities and owner's equity $54100 Oros Riding Club Statement of Cash Flows For the Month Ended November 30, 2011 Cash flows from operating activitles Net income Adjustments to reconcile net income to net cash flows from operating activities $3,775 Increase in accounts receiva ble S (400 (550) 400 Increase in supplies Increase in accounts payable Net cash flows from operating activities Cash flows from Investing actlvities Purchase of horses Sale of horses Net cash flows from financing activities Cash flows from financing activitles Investment by Owner Cash withdrawals Net cash flows from financing activities Net Increase In cash Cash at beginning of month Cash at end of month (550) $3,225 $2,000 1,000 1,000 $6,000 (2,400) 3,600 $7,825 475 58,300