None Provided16, Economics, College Term Papers.com


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None Provided16

None Provided16 A) The limitations given by a single-year statement is that this statement only shows for a given amount of time, and can be deceiving. And they can be overcome by the use of comparative statements, because with these statements you can see more of a history of how a company has done. With this one can see more figures and they can analyze the whole situation. B) Comparative balance sheets and comparative income statements, can be misleading, because accountants can play with numbers and make things either look better or worse than they really are. They can do what is sometimes called Window dressing, when one makes a financial statement appear more favorable than they really are. A) Current Ratio is important, because this tells you if you have enough money to pay your bills. If the Ratio is too low, this may signify that the liabilities are very close to the current assets. It is possible for the ratio to be high, these may happen if we have to much cash on hand, and we can fix this problem by paying current debts. B) The defensive interval ratio is beneficial because measures the number of days the firm can continue to meet its daily cash expenses from its present supply of quick assets. C) Cost of goods sold is used In the numerator because your dividing by the average inventory, As the inventory turnover increases, a business increases the risk of running out of inventory or being short of inventory. The importance of a statement of cash flow is to have true cash flows of the business. The SCF restates the firm’s flow of funds from an accrual accounting basis to a cash accounting basis. Operating Management is mainly concerned with the major day-to-day activities that generate revenue and expenses. Where as financial management is mainly concerned with where to get cash and how to use cash for the benefit of the entity. The three types of activities that are summarized in the statement of cash flows are the Operating Activities, the investing activities and the financing activities. You can use the indirect method to focus on cash, because the indirect method in a statement of cash flows, the method that adjusts net income to reflect only cash receipts and outlays. Depreciation can be the most crucial aspect of a statement of cash flows if prepared by the indirect method. Because accountants view depreciation as an allocation of historical cost to expense. Therefore depreciation expense does not entail a current outflow of cash. No I do not agree because the operating cycle is the time span during which cash is spent to acquire goods and services that are sued to produce the organization’s output, which in turn is sold to customers, who in turn pay for their purchases with cash. Items most commonly classified as current assets, are Accounts receivable’s, inventories, basically current assets are cash and all other assets that are reasonably expected to be converted to cash or sold or consumed during the normal operating cycle. A Subordinated debenture is a creditor claim that is junior to the other creditors in exercising claims against assets. Bibliography:

Word Count: 537