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- -Reports the financial position(economic resources and sources of financing) of an accounting entity at a point in time
- -Assets = Liability + Stockholder's Equity
- -Cash, accounts receivable. plant and equipment, notes payable, contributed capital
- Book value not equal to Market Value (what people value)
- Reports the accountant's primary measure of economic performance during the accounting period.
- Revenue - Exprenses = net income
- Sales revenue, cost of goods sold, selling expense, interest expense.
- Accounting Earning not equal Economic Earning (recognized at different time)
Statement of Retained Earnings
- Reports the way that net income and the distribution of dividends have affected the financial position of the company during the accounting period.
- Beginning RE + Net income - Dividends = Ending RE.
- Net income is taken from the income statement; dividends are distributions to stockholders
Statement of Cash Flows
- Reports inflows (receipts) and outflows (payments) of cash during the accounting period in the categories operation, invsting, and financing.
- +/- CFO(cash flows from operating activities +/- CFI +/- CFF = Change in Cash
- Cash collected from customers, cash paid to suppliers, cash paid to purchase equipment, cash borrowed from banks
- CFO: directly related to earning income
- CFI: related to the acquisition or sale of the company's productive assets
- CFF: directly related to the financing of the enterprise itself
- Resources of the firm. 1. provide future benefit, 2 transaction or event, 3 ownership.
- Financing provided to the firm by outsiders (customer, suppliers) 1.future sacrifice 2. transaction or event, 3 Must pay
- Financing provided to the firm by insides
Current Ratio (CR)
Return on assets (ROA)
L.T. Debt to equity (D/E)
- Current Assets/Current Liabilities, a measure used to evaluate the firm's liquility.
- Net Income/Total Assets, a measure used to evaluate the firm's profitability independent of its capital structure
- Long-term debt/Total Owner's Equity, a measure of Leverage