Skip to content
Class Notes

Class Notes for Financial Accounting in an Economic Context, 9th Edition

Class Notes for Financial Accounting in an Economic Context, 9th Edition provides well-organized, detailed notes to help you grasp key concepts quickly and improve your understanding.

Preview 16 of 149 pages

See the first 16 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    CHAPTER 1 Financial Accounting and Its Economic Context SYNOPSIS In this introductory chapter, the author discusses the economic context of financial accounting including: 1) the demand for financial information; 2) the environment of financial accounting; 3) the controls associated with the financial accounting process; and 4) generally accepted accounting principles. The author illustrates and discusses the roles that equity investors, debt investors, managers, and auditors have in the financial accounting environment, providing a basis for the discussion of both a user orientation and an economic consequence perspective. The author introduces the auditor’s report, the management letter, the financial statements and the footnotes. The author also presents the basic concepts of financial statement analysis, solvency and earning power. The basic forms of investment, debt and equity are described. The economic environment in which financial reports are prepared and used is discussed and key elements of the financial environment are introduced. An international perspective of the general state of accounting practices and standards throughout the world is also considered. The ethics vignette considers the independence of accounting firms who also serve as middlemen in the sale of their audit client’s products . The Internet research exercise examin es subsequent results for IBM a company that has performed well during recent years , but fell short of analysts ’ expectations in Q1 of 2013. The author compares and contrasts the four different types of accounting (i.e., financial, not - for - profit, managerial, and tax) along six dimensions in Appendix 1A. The following key points are emphasized in Chapter 1: 1. The economic role of financial accounting statements. 2. The four financial statements and the kind of financial information each provides. 3. The standard audit report, management letter, and footnotes to the financial statements. 4. The two forms of investment — debt and equity — and how information on the financial statements relates to them. 5. The nature and importance of corporate governance and the role of financial statements. 6. The current status of accounting standard setting – both in the U.S. and internationally.

  2. Page 2
  3. Page 3
    Read page 3 as text

    Chapter 1 2 TEXT/LECTURE OUTLINE Financial accounting and its economic context. I. Financial reporting and investment decisions. A. Investment decisions. 1. Profit - seeking companies – Managers prepare reports for owners . These reports include the four financial statements: the balance sheet, income statement, statement of shareholder s’ equity and statement of cash flows. 2. Owners and other interested parties including potential investors, bankers, government agencies, customers, and suppliers use publicly available financial reports to assess the financial condition and performance of the company and its managers. 3. User decisions are often based on information provided by financial reports. 4. Effects of user decisions may impact the financial condition of the company, its managers and owners. B. Economic consequences. The use of financial statements by outsiders leads to economic consequences for managers and companies. Knowledge of how business decisions effect the financial statements is useful in assessing how management decisions might be perceived by outsiders. Considering and understanding how such decisions affect the financial statements is an economic consequence perspective. C. User orientation. Managers need to know how financial statements are used. They also need to know how to read, evaluate, and analyze financial statements. This perspective is called user orientation. See also Appendix 1A introducing managerial, tax and not - for - profit accounting. II. The demand for financial information: a user’s orientation (Mary Jordan / Microline vignette). A. Consumption vs. investment. B. Where to invest? C. Demand for documentation. D. Demand for independent audit. E. Martin and the CPA: different incentives. F. The auditor’s report, management letter, financial statements, and footnotes.

  4. Page 4
    Read page 4 as text

    3 Chapter 1 1. Balance sheet. a. Assets. b. Liabilities. c. Shareholder s’ equity. i. Common stock. ii. Retained earnings. 2. Income statement. a. Revenues. b. Expenses. c. Net income. 3. Statement of shareholder s’ equity – retained earnings and dividends. 4 . Statement of cash flows. a. Operating activities. b. Investing activities. c. Financing activities. G . Analysis of financial statements. 1. Solvency. 2. Earning power. H. Forms of investment. 1. Debt. 2. Equity. I. Summary and wind up of Microline vignette. III. The economic environment in which financial reports are prepared and used. A. Key elements of the financial accounting environment. 1. Providers of capital. a) Equity investors. (1) Equity investors purchase ownership shares (i.e., equity) in a company. (2) Equity investors are most interested in acquiring information about a company's earning power. b) Debt investors. (1) Debt investors loan capital to a company.

  5. Page 5
    Read page 5 as text

    Chapter 1 4 (2) Debt investors are most interested in acquiring information about a company's solvency position. 2. Managers. 3. Contracts. a) Debt contracts. b) Compensation contracts. 4. Financial accounting statements. 5. Independent auditors. 6. Legal liability. 7. Ethics and professional reputation. B. Reporting entities and industries. 1. Consolidated financial statements. 2. Subsidiaries. 3. Industries. a. Manufacturing. b. Retailing. c. Services. d. SIC codes. IV. Corporate governance. A. Financial information users and capital markets. 1) Equity investors. 2) Debt investors. 3) Management and other users. 4) Capital markets. B. Contracts. 1) Debt covenants. 2) Management compensation. C. Regulations and standards. 1) SEC. 2) GAAP. 3) Political process. D. Independent auditors. 1) “Big Four”. 2) Regional and local firms.

  6. Page 6
    Read page 6 as text

    5 Chapter 1 E. Board of directors and audit committee. F. Sarbanes - Oxley Act (2002). 1) Certification by principal executive and financial officers. 2) Additional responsibilities to assure adequate internal control. 3) Annual report on internal controls over financial reporting. G. Legal liability. H. Professional reputation and ethics. V. International Perspective: Movement Toward a Single Global Financial Reporting System . VI. Appendix 1A Three Other Kinds of Accounting: A. Not - for - profit accounting. Not - for - profit accounting generates financial information for those entities that do not exist solely to generate profits. B. Managerial accounting. Managerial accounting generates financial information useful to managers for making day - to - day operating decisions. C. Tax accounting. Tax accounting generates financial information in compliance with the Internal Revenue Code. VII. Ethics in the real world. VIII. Internet research exercise. LECTURE TIPS 1. Students often expect accounting to be a boring “cookbook” course. Discussion of Chapter 1 can set the tone for the rest of the course through a relevant, interesting discussion of the economics of accounting and an early introduction of real world examples. 2. Although students usually understand the motives underlying the economic consequences arguments, they often do not apply these motives to accounting. OUTSIDE ASSIGNMENT OPPORTUNITIES Article search: current developments at Google . 1. Search the financial press ( The Wall Street Journal, Barrons, Fortune, Forbes, etc.) for an article reporting a current development that relates to Google . C ons ider the impact on Google ’s financial sta tements (presented in Appendix C ), from both a user orientation and an economic consequence perspective and present your findings in writing and/or orally to the class.

  7. Page 7
    Read page 7 as text

    Chapter 1 6 Article search: current developments in accounting standards 2. Search the financial press ( The Wall Street Journal, Barrons, Fortune, Forbes, etc.) for an article that reports a current development in accounting standards, for example, a new or proposed p ronouncement by the FASB or IASB . Consider its impact from both a user orientation and an economic consequence perspective and present your findings in writing and/or orally to the class. ANSWERS TO IN - TEXT DISCUSSION QUESTIONS Page No. 4 . The first statement reflects an economic consequences perspective. Management of high - tech companies knows that the capital markets make decisions based on the level of a company’s reported profits. Therefore, management would prefer to use accounting methods that would tend to maximize their reported profits. The second statement takes a user orientation. Analysis of financial statements is important to users in making investment and credit decisions. As will be learned throughout the text, financial statements that do not reflect the true costs associated with reported earnings mislead investors who depend on the information contained in financial statements in making investment decisions. 12. Sales and net income would be reported in the income statement. Net income would also be reported in the statement of shareholder s’ equity. Total assets and total liabilities would be reported in the balance sheet. Net cash flows from operating activities would be reported in the statement of cash flows. Total expenses would be $ 8,510 million, the difference between sales and net income. Shareholder s’ equity would be $ 3.9 billion , the difference between total assets and total liabilities. The net income to sales ratio would be 10.4 %, or net income divided by sales. 13 . A financial services company such as Bank of New York is especially interested in assets that are liquid and have contractual terms that specify the future amounts of cash flows, which can be matched with funding sources such as deposits and borrowings. A bank’s loan portfolio turns over fairly rapidly. A consumer products company such as Coca Cola Company makes investments in bottling companies and other entities to further its production and marketing of soft drinks and other beverages. Such investments would be relatively more permanent and less liquid than those of a financial services company, and future cash flows would be less easily determinable. 15. T he reported earnings of over $13.8 billion leads one to conclude that GE has significant earning power and strongly suggests the possibility of similar earnings in the future. Past business decisions by GE’s management resulted in earnings of this magnitude. A comparison of these earnings against management’s goals, or against earnings for other years, or against their competitors’ earnings would tell us a lot more about management’s performance. Compensation contracts with managers would ordinarily

  8. Page 8
    Read page 8 as text

    7 Chapter 1 contain provisions that enhanced managers’ earnings when earnings targets and other specified criteria are met. 16 . Boeing manufacturer Tommy Hilfiger manufacturer (outsources actual manufacturing) DuPont manufacturer American Express financial services General Electric manufacturer Microsoft manufacturer eBay service Southwest Airlines service Sprint service 17 . Private companies, that is , those companies whose shares are not traded on the public stock exchanges are not subject to oversight by the Securities and Exchange Commission or the Public Company Accounting Oversight Board. Private companies avoid the costs of complying with regulations issued by these authorities. These costs have risen in recent years due largely to compliance with the requirements of the Sarbanes Oxley Act. The managers of private companies are less burdened by the restrictions and costs of regulation. The investing public largely is unable to invest in private companies. Those who do invest in private companies do not benefit from the protections regulation affords, nor do they suffer the costs of regulatory compliance. 18 . Because stock market analysts were less optimistic about IBM ’s future revenues and earnings, t he market price of the company’s stock de creased . This was because the desi re to own the company’s stock de creased. More investors wanted to own the stock because the future of the company looked weake r than it had before publication of the 2013 first quarter results . Share prices are related to the market’s expectations of the probability of future cash flows. When the prospect of future cash flows decreases , share prices respond negatively . Management compensation is often tied to profitability and/or to the market price of the company’s sto ck. These incentives are designed to impact management behaviour by encouraging management to work to improve profitability. 18 . Motorola’s employee incentive plan awards bonuses to eligible employees that achieve specified business goals. Tying management’s financial goals to employee compensation increases the likelihood that employees will address corporate financial goals with enthusiasm, thereby increasing the likelihood that financial goals will be met. 19 . Perhaps the current controversy over accounting standards for measuring management compensation rages because the benefits of improving financial reporting are not readily susceptible to measure ment while the perceived negative consequences are apparent to those who fear they would be negatively impacted. This is true with respect to all kinds of change. 2 1 . Dell, Inc. and PricewaterhouseCoopers would have had a conversation about the magnitude and scope of the accounting irregularities, the impact on the financial statements and the extent to which the errors may have affected decisions made (or to be made) by persons rel ying on the accuracy of the financial statements. If it was determined that the financial statements were materially in error, corrections to the

  9. Page 9
    Read page 9 as text

    Chapter 1 8 financial statements would have been discussed. Possible restatement of prior years’ financial statements may also have been discussed. 21 . Audit committee members share the responsibility for oversight of management’s choice of auditor and monitoring the audit to ensure it is thorough, objective and independent. Since the auditor’s job is to audit the financial statements, audit committee members need to have a pretty good understanding of both audits and financial statements. 22 . Sarbanes - Oxley was intended to force a tightening of corporate governance. The responsibilities of corporate directors, audit committees, corporate executives, financial officers and auditors have been dramatically increased. With the new emphasis on responsibility auditors and managers are on high alert and are less willing to overlook errors in financial reporting and weaknesses in internal controls. This new, higher level of diligence has lead to an increase in incidents of accounting errors being admitted and corrected. 23 . “Sound principles of corporate governance are critical to obtaining and retaining the trust of investors -- and to GE's overarching goal of performance with integrity”, - as quoted from the web site cited. 24 . A single set of global standards would provide uniformity across international borders and to provide investors and creditors credible information for comparison and decision making and improve transparency in global financial markets. Having two different sets of financial reporting standards results in costs associated with duplicate reporting and reconciling two sets of information. Having a single set of standards creates interesting and unresolved international legal issues. For instance, can the SEC impose its authority to determine accounting standards to international standards setters? Also, should small businesses across the world be forced to adopt international accounting standards even if they poorly serve the needs of their exclusively local users? CHARACTERISTICS OF END - OF - CHAPTER ASSIGNMENTS Item Difficulty Description Issues for discussion: ID1 – 1 E Financial statement users ID1 – 2 E Auditors and management fraud ID1 – 3 E Audit committees ID1 – 4 M Banks, the credit crunch, and the financial statements ID1 – 5 M Financial statement relationships ID1 – 6 E Debt covenants ID1 – 7 E Managing reported profits ID1 – 8 E Audit report ID1 – 9 E Corporate governance ID1 – 10 E Ethics and accounting ID1 – 11 M Global reporting standards ID1 – 12 E International accounting standards ID1 – 13 E Managerial vs. Financial accounting ID1 – 14 M The annual report of Google

  10. Page 10
    Read page 10 as text

    CHAPTER 2 The Financial Statements SYNOPSIS The author opens the chapter with an illustration of the flow of capital through a business. Operating, investing and financing activities are introduced. The author then presents overviews that include the various components of each financial statement: the classified balance sheet, the income statement, the statement of shareholder s’ equity, and the statement of cash flows. The main part of the chapter ends with a discussion of the relationships among the financial statements. An international perspective is presented on how financial stateme nts differ in other countries. This discussion includes a n examination of the financial statements of Unilever , a leading supplier of consumer brands registered in the Netherlands. The ethics vignette cons iders issues faced by a Swiss manager who is hesitant to adopt I FRS . The Internet research exercise considers the financial results and corporate strategy of JCPenney . The following key points are emphasized in Chapter 2: 1. The three basic activities of a business and how they are reflected in the financial statements. 2. The balance sheet, income statement, statement of shareholder s’ equity, and statement of cash flows and how these financial statements are used. 3. Non - U.S. financial statement format and terminology, similarities and differences. TEXT/LECTURE OUTLINE The financial statements. I. How businesses are conducted. A. Flow of capital through a business . B. Three activities of a business. 1. Financing activities: t hose activities involving the collection of capital through debt or equity issuances and any associated payments. 2. Investing activities: those activities involving the acquisition and the sale of producing assets (i.e., the assets used to produce and support the goods and services provided).

  11. Page 11
    Read page 11 as text

    Chapter 2 2 3 3. Operating activities: those activities involving the sale of goods and services. II. The four fundamental financial statements. A. Classified balance sheet. 1. The classified balance sheet is a statement of the company’s financial position as of a point in time. The balance sheet is a statement of the fundamental accounting equation. 2. In a classified balance sheet, assets and liabilities are grouped into sub - classifications; in an unclassified balance sheet, assets and liabilities are not grouped into sub - classifications, they are simply listed. 3. Assets and liabilities are listed on the balance sheet in order of liquidity. 4. Asset groupings. a) Current assets. (1) Current assets are assets that are expected to be realized or converted into cash in the near future, usually within one year. (2) Current assets typically include cash, short - term investments, accounts receivable, inventory, and prepaid expenses. b) Long - term investments. c) Property, plant, and equipment. d) Intangible assets. 5. Liability groupings. a) Current liabilities. (1) Current liabilities are liabilities that are expected to be settled through the use of current assets. (2) Current liabilities typically include accounts payable, miscellaneous other payables (such as wages payable, interest payable, and so forth), and current maturities of long - term debts. b) Long - term liabilities. 6. Shareholder s’ equity groupings. a) Contributed capital.

  12. Page 12
    Read page 12 as text

    3 2 Chapter 2 b) Retained earnings (i.e., earned capital). c) Effect of organizational form (i.e., corporate versus partnership) on the equity section. B. Income statement. 1. The income statement explains the change in the company’s net assets (i.e., total assets less total liabilities) during the accounting period due to operating activities. 2. The change in net assets from operating activities is called net income (or loss) and is computed as revenues less expenses. a) Revenues are defined as inflows of assets or outflows of liabilities over a period of time due to a company’s operating activities. b) Expenses are defined as outflows of assets or inflows of liabilities over a period of time due to a company’s operating activities. 3. Since revenues and expenses are defined by the changes in assets and liabilities, every transaction affecting the income statement also affects at least one asset or liability account on the balance sheet. C. Statement of shareholder s’ equity. 1. The statement of shareholder s’ equity explains the change in the retained earnings and contributed capital balances during the accounting period. 2. The change in the retained earnings balance is due to the company’s net income or loss and distributions to the company’s owners (i.e., dividends). 3. The change in the contributed capital balance is due to capital collected from the sale of equity securities. D. Statement of cash flows. 1. The statement of cash flows explains (i.e., summarizes) the change in the cash balance during the accounting period. a) Cash flows from operating activities. b) Cash flows from investing activities. c) Cash flows from financing activities. III. Relationships among the financial statements. I V. International perspective.

  13. Page 13
    Read page 13 as text

    Chapter 2 4 3 V. Review Problem: Bed Bath & Beyond. V I . Ethics in the real world. VI I . Internet research exercise. LECTURE TIPS 1. The illustration of the flow of capital through a business introduces the concept of operating, investing and financing activities. 2. Students should be encouraged to read the text carefully so as to thoroughly understand what each account measures. A useful in - class drill requires students to explain what the amount reported on the balance sheet for a particular account represents. 3. Many introductory students have difficulty differentiating between cash collections and revenue and between cash disbursements and expenses. It is critical that these differentiations are made when discussing the income statement versus the operating activities section of the statement of cash flows. 4. It is critical to students’ understanding of accounting and how to use financial statement information that they grasp how the four financial statements relate. However, most students often view each financial statement as independent and do not appreciate how the statements relate. Therefore, explain and demonstrate how the financial statements are linked together and complement one another. 5. When first discussing how to use the information in the financial statements, provide a general overview of how a potential investor would ascertain the company’s solvency (i.e., compare its assets to its obligations) and e arning power. T hen provide a more detailed discussion by using a classified balance sheet (i.e., using current assets versus current liabilities), the income statement, the statement of cash flows, and ratio analysis. OUTSIDE ASSIGNMENT OPPORTUNITIES Study of annual reports: evaluation of profitability and solvency using financial statements and other information. 1. Obtain a recent annual report for a local publicly held company. Read the financial statements and notes and evaluate profitability and solvency using concepts developed in the chapter. Read the letter to shareholder s and other information in the annual report and compare with the results of your analysis; especially note instances where the letter to shareholders or the other information reads more favorably than indicated in the financial statements. Report your findings in writing and/or in a brief presentation to the class. Comparative study of annual reports: a foreign company compared to a U.S. company. 2. Obtain a recent annual report for a publicly held foreign company. Compare the form, content, and terminology used in its financial statements to that of a U. S. public company,

  14. Page 14
    Read page 14 as text

    5 2 Chapter 2 preferably one in the same industry. Report your findings in writing and/or in a brief presentation to the class. ANSWERS TO IN - TEXT DISCUSSION QUESTIONS Page No. 31 . Cash provided by operating activities includes cash collected from the sale products and cash payments for related costs and expenses. Investing activities consist of capital expenditures for additional plant and equipment and other assets that relate to the productive capacity of the business. Financing activities include proceeds from the issuance of debt and/or equity, and related repayments of debt and/or payment of dividends. 34 . McDonald’s Corporation’s total assets consist mostly of property, plant, and equipment because McDonald’s is a traditional “brick and mortar” business, whereas Google is an internet company whose presence exists mostly in cyberspace and which is valued mostly for it’s intangible assets and intellectual property. 3 4 . The principal revenue producing asse t of a retailer such as Sears is its inventory of merchandise, which i s included in current assets. The amount of inventory would be high relative to property, plant and equipment, especially given that many retailers lease, rather than own, their premises, and leasehold interests and obligations are n ot shown on the balance sheet. Current assets also include cash, short - term investments, receivables, and prepaid expenses. AT&T, a legacy telephone company, has a huge investment in equipment which is spread throughout its network. All this equipment is a non - current asset. AT&T has little inventory and its current assets are mostly cash and receivables. 3 5 . Short - term investments are made in readily marketable debt and equity securities to earn income on otherwise idle funds. An insurance company such as WellPoint maintains a high level of short - term investments to insure that they will be able to pay claims, make refunds, and so on, on a timely basis. 35 . The principal activities of banks such as JP Morgan Chase are to earn net interest income by gathering deposits and in turn loaning those funds out to others, as well as providing fee - based services. The largest asset category involved in thi s process is the loan portfolio, a category of receivable. Wal - Mart is a retailer. It’s main business involves buying and re - selling inventory. Receivables are a relatively minor facet of Wal - Mart’s business. 3 5 . Retailers such as Home Depot and manufacturers such as Goodyear Tire & Rubber are in the business of selling products, and carry significant amounts of inventory. Service enterprises such as Yahoo and financial institutions such as Bank of America do not deal in products and therefore do not have inventories. 36 . These are the production and/or acquisition costs of television programming that has not yet been licensed or sold. These costs will be expensed when the programs are licensed or sold.

  15. Page 15
    Read page 15 as text

    Chapter 2 6 3 37 . Patents are i ntangible asset s that are reflected on a company’s balance sheet when it purchases them from another company. The costs of developing patents internally are generally expensed when incurred. The costs of registering a patent, however, are capitalized. Patents are intellectual property of great value and can confer a monopoly on a patent holder. Patent rights must be zealously protected to prevent their value from being diminished. Patents are reported in the balance sheet at cost, net of accumulated amortization. 38 . The intangible asset goodwill is reflected on a company’s balance sheet when it purchases another company for an amount greater than the market value of its identifiable assets and liabilities. A large portion of goodwill on Cisco System’s balance sheet indicates that Cisco Systems is growing through acquisitions of other companies as opposed to growth through internal expansion. 39 . The primary source of funding for banks such as Bank of America is through deposits gathered from its diverse customer base. Banks do not present classified balance sheets, but most deposits are relatively short - term (current). Borrowings are a secondary source of funding, and are not as great as the deposit liability. Banks are highly leveraged, i.e. , shareholder s’ equity represents a smaller portion of total assets (usually less than 10%). 4 0 . A deficit in retained earnings means that Amazon.com has not been profitable on a cumulative basis since its inception, net of any distributions to shareholder s. This is not an uncommon situation for young companies, especially those in Internet related businesses. 4 2 . Cost of goods sold represents the original cost of inventory items sold by manufacture rs, wholesalers, and retailers. This inventory cost is reported separately from other operating expenses. Service businesses such as H & R Block provide services and do not sell inventory, thus there is no cost of goods to report. 4 3 . If the profits were the result of expense reductions, and continued expense reductions were in doubt, continued profits would be doubtful as well. 4 3 . An excess of other (non - operating) expenses over other (non - operating) revenues would cause net income to be lower than net income from operating activities. In AMR’s case, there is an overall net loss. Investors would be more concerned about net income from operating activities which would be expected to recur while (significant) other revenues and expens es tend to be one - time items. Analysts may see potential for on - going profitability if non - operating expenses can be controlled, but there should be caution given the overall loss shown by the company. 4 4 . Dividends are reported in the statement of shareholder s’ equity as a reduction in retained earnings. Net income is reported as an increase in retained earnings in the statement of shareholder s’ equity. Retained earnings represent the portion of net income not paid to shareholders as dividends. The difference – 60% to 70% of net income in the case of Johnson & Johnson – represents the portion of earnings normally reinvested in the business.

  16. Page 16
    Read page 16 as text

    7 2 Chapter 2 45 . Cash flows from oper ating activities generally are usually be expected to continue, whereas cash flows from investing act ivities are understood to vary considerably f rom year to year. Furthermore, cash flows from operating activities are more closely tied to profitability than are investing cash flows, which tend to be negative when a company is healthy and growing. Reclassifying cash outflows from operating to investing would make the company’s continuing operations appear more profitable while the increase cash outflows for investing would make the company appear to be enjoying positive growth. 46 . Cash flow from (or used) in operations is shown in the first section of the statement of cash flows under the caption “operating activities”. Analysts do not necessarily react negatively to negative cash flows from operations for emerging businesses. Negative cash flows during the introductory phase of a company’s life cycle are not uncommon. A favorable trend in cash flows, and prospects for positive cash flows as the business grows, would be important to the analyst. 46 . Cash flows from investing activities include cash inflows and outflows associated with the purchase and sale of productive assets (property, plant and equipment, and intangibles), including the acquisition of other businesses, and long - term investments in securities. Yahoo’s use of cash for investing activities indicates additional investment in assets, while Amazon appears to have sold more assets than it purchased. 46 . Cash flows from financing activities include proceeds from the issuance of common stock, so both companies would likely have had positive cash flows from financing activities during their early years. CHARACTERISTICS OF END - OF - CHAPTER ASSIGNMENTS Item Difficulty Description Brief Exercises: BE2 – 1 E Dividends as a percentage of net income BE2 – 2 E Financing assets BE2 – 3 E Assessing solvency BE2 – 4 E The statement of cash flows across time BE2 – 5 E Financial statement formats - International Exercises: E2 – 1 M Identifying financing, investing, and operating transactions E2 – 2 M Identifying financing, investing, and operating transactions E2 – 3 E Balance sheet or income statement account? E2 – 4 M Financial statements and the lending decision E2 – 5 M Retained earnings changes across time E2 – 6 M Retained earnings changes across time E2 – 7 M Using working capital to assess solvency E2 – 8 H Solvency, financing and debt covenants E2 – 9 M The statement of cash flows across time E2 – 10 M The statement of cash flows across time

133 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.

Unlock the full document

More Accounting study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.