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My Life

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The Balance Sheet and
Financial Disclosures

CHAPTER

LEARNING OBJECTIVES

OVERVIEW

LO1

LO2
LO3
LO4
LO5

Chapter 1 stressed the importance of the financial statements in helping investors and creditors predict future cash flows. The balance sheet, along with accompanying disclosures, proAfter studying this chapter, vides relevant information useful not only in helping you should be able to: investors and creditors predict future cash flows
Describe the purpose of the balance but also in the related assessments of liquidity sheet and understand its usefulness and limitations. and long-term solvency.
Distinguish between current and noncurrent
The purpose of this chapter is to provide assets and liabilities.
Identify and describe the various balance sheet an overview of the balance sheet and asset classifications. notes to the financial statements and to
Identify and describe the two balance sheet liability classifications. explore how this information is used by
Explain the purpose of financial statement decision makers. disclosures. LO6

Explain the purpose of the management discussion and analysis disclosure.

LO7

Explain the purpose of an audit and describe the content of the audit report.

LO8

Identify and calculate the common liquidity and financing ratios used to assess risk.

FINANCIAL REPORTING CASE
What’s It Worth?

“I can’t believe it. Why don’t you accountants prepare financial statements that are relevant?” Your friend Jerry is a finance major and is constantly badgering you about what he perceives to be a lack of relevance of financial statements prepared according to generally accepted accounting principles. “For example, take a look at this balance sheet for Leon’s Furniture Limited (www.leons.ca) that I just downloaded off the Internet. Leon’s is a furniture company with

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