Solution Manual for Financial Accounting in an Economic Context, 9th Edition

Preview (16 of 573 Pages)

100%

Purchase to unlock

Solution Manual for Financial Accounting in an Economic Context, 9th Edition - Page 1 preview image

Loading page ...

1CHAPTER 1FINANCIAL ACCOUNTINGINANECONOMIC CONTEXTISSUES FOR DISCUSSIONID1–1Security analysts and stockholders: These users would use financial statements to try to estimate thefuture earnings and cash flow potential of the company, which would be used to project a value for thecompany’s stock.Bank loan officers:These users would use the financial statements to determine the ability of acompany to repay loans to the bank.A company’s customers and suppliers:These users would use financial statements to determinewhether to extend credit to the company (suppliers) or whether to rely upon the company to be asupplier (customers). Both suppliers and customers would also use the financial statements to monitorthe company’s profit margins.Public utilities: This group would use the financial statements to determine the company’s growth rateand how that might impact upon the company’s utility needs. Also, they would evaluate the company’sability to pay its bills.Labor unions:These groups would use the financial statements to monitor the profitability of thecompany to help determine the amount of pay raises and benefits that it will negotiate for from thecompany.A company’s managers:The company’s managers will use the financial statements to assess theoverall financial health of the company. This could impact the managers in a number of ways: raises,promotion opportunities, performance of other departments, etc.ID1–2The board of directors serves various functions for a company.One is to represent and protect theinterests of the stockholders who are not on the board.Another is to provide oversight and input tomanagement.The managers are involved in running the business on a day to day basis whereas theboard is more focused on the bigger, long term picture. A weak board may not ask probing questionsof management but instead may take everything at face value and believe anything that managementsays to them. A healthy management team would want a strong board that delivers valuable input. Amanagementteamthatwantsaweakboardofdirectorsmaybetryingtohidesomething(management fraud).Auditors are concerned with management fraud because, if there is a problem, in many cases theauditors will be sued by the stockholders on the basis that the auditors should have detected the fraud.

Preview Mode

This document has 573 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

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

Accounting

Master Managerial Accounting Techniques

Controlling and Reporting of Real Assets

Accounting Audit Final Exam MCQs 2015

Team A Week 5 Problems

Sarbanes Oxley Act, GAAP and IFRS

Decision Making with Managerial Accounting

Government wide statements and Fund statements

Understanding Internal Control and Audit Processes

Company

Explore

Study Tools