Financial And Managerial Accounting For MBAs, 4th Edition Solution Manual

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Solutions Manual, Module 11-1Module 1Financial Accounting for MBAsDISCUSSIONQUESTIONSQ1-1.Organizationsundertakeplanningactivitiesthatshapethreemajoractivities:financing, investing, and operating.Financingis the meansa company usesto payfor resources.Investingrefers to the buying and selling of resources necessary tocarry out the organization’s plans.Operatingactivities are the actual carrying out oftheseplans.Planningisthegluethatconnectstheseactivities,includingtheorganization’s ideas, goalsand strategies. Financial accounting information providesvaluable input into the planning process, and, subsequently, reports on the results ofplans so that corrective actioncanbe taken, if necessary.Q1-2.An organization’s financing activities (liabilities and equity= sources of funds) pay forinvesting activities (assets= uses of funds). An organization’s assetscannotbemoreor less than its liabilities and equity combined. This means: assets = liabilities +equity. This relation is called the accounting equation (sometimes called thebalancesheet equation), and it applies toallorganizations at all times.Q1-3.The four main financial statements are: income statement, balance sheet, statementof stockholders’ equity, and statement of cash flows. Theincome statementprovidesinformationaboutthe company’s revenues, expenses and profitability over a periodof time. Thebalance sheetlists the company’s assets (what it owns), liabilities (whatit owes), and stockholders’ equity (the residual claims of its owners) as of a point intime.Thestatementofstockholders’equityreportsonthechangestoeachstockholders’ equity account during the period.Thestatement of cash flowsidentifiesthe sources(inflows)and uses(outflows)of cash, that is, where the company got itscash from and what it did with it.Together, thefourstatements provide a completepicture of the financial condition of the company.

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