Chapter 1 Financial Statements and Business Decisions ANSWERS TO QUESTIONS 1. Accounting is a system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers. 2. Financial accounting involves preparation of the four basic financial statements and related disclosures for external decision makers. Managerial accounting involves the preparation of detailed plans, budgets, forecasts, and performance
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Financial Statement Differentiation Paper Financial Statement Differentiation Paper ACC/561 The Four Financial Statements consist of income statement, balance sheet, statement of cash flow, and statement of owner’s equity. The progress with the income statement, states gross revenues, minus the goods sold would give the gross profit of the company. Balance sheet consists of long term assets and long term liabilities that are current issues. The cash flow would be recognized by the money the
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answer. 1. Which of the following statements is NOT an objective of financial reporting? a. Provide information that is useful in investment and credit decisions. b. Provide information about enterprise resources, claims to those resources, and changes to them. c. Provide information on the liquidation value of an enterprise. d. Provide information that is useful in assessing cash flow prospects. 2. Accrual accounting is used because a. cash flows are considered less important. b. it
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Once finance is secured it’s funding, managers need to make sure it is applied appropriately. All business managers need to be aware of the need to manage cash flow in the business. 2. What is cash flow? The flow of money that comes into a business and that a business spends. 3. What are contingencies? Out of a businesses cash flow some money for contingencies need to be set aside. This is an unanticipated event that leads to financial difficulty. Businesses should have money saved for
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Chapter 4 Cash Flow and Financial Planning ( Instructor’s Resources Overview This chapter introduces the student to the financial planning process, with the emphasis on short-term (operating) financial planning and its two key components: cash planning and profit planning. Cash planning requires preparation of the cash budget, while profit planning involves preparation of a pro forma income statement and balance sheet. The text illustrates through example how these budgets and statements are developed
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as the earnings per share multiplied by the P/E ratio. 3) Explain how depreciation generates actual cash flows for the company? Depreciation is a non-cash deduction in net-income and should be added back to net income to increase cash balance and for calculating cash flow statement. Depreciation also decreases net income .With lower net income; income tax will be lower thus saving a cash outflow. 4) What is the difference between accumulated depreciation and Depreciation expense and how are
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The cash flow statement is the newest of the three financial statements; companies have only been required to furnish investors with it since 1988. The cash flow statement is similar to the income statement, except that it dispenses with some of the abstract items found on the income statement (such as depreciation) and focuses on actual cash. Most of the information found on the cash flow statement is contained in either the income statement or the balance sheet, but here it is organized in such
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lectures1 © Path Finance, www. path2finance.com Table of Contents 1.1 Financial Statements Analysis (R 22) ..........................................................................................................2 1.1.1 Introduction ....................................................................................................................................................................2 1.1.2 Financial Statements and Other Sources .........................................................
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Analysis To analyze a statement of cash flow means to investigate the cash flow of a company's operations, and study the cash inflows and outflows. Candela had severe growth in 2002 that severely affects the net cash of operating activities. Analyzing the cash flow may have given Candela the opportunity to change its cash from operations. An analysis of a cash flow will give the reader an indication of what changes would improve the company's growth. A cash flow statement divides three functions
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A Little Bit of History The International Accounting Standard number 7 – Statement of Cash Flows (IAS7 or the standard) is the current authority issued by the International Accounting Standards Board (IASB) requiring the preparation and presentation of a Statement of Cash Flows, providing through it the historical changes in cash and cash equivalents of an entity. The standard was first issued in 1977 as IAS 7 – Statement of Changes in Financial Position by the International Accounting Standards
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