BUS100_EM_17TMorrow - gives an indication of the financial...

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Essay Memo Chapter 17 Assignment: BUS100EM17TMorrow.rtf Ch 17 - Understanding Financial Information and Accounting Memo To: Professor Gayle Haro From: Todd Morrow Date: April 25, 2010 Re: Intro to Business BUS100EM17 TMorrow.rtf 1. What key information would a firm’s financial statements yield? A firm’s financial statements are a summary of all transactions that have occurred over a particular time. These transactions include the balance sheet, which reports the firm’s financial health on a specific date, the income statement, which summarizes revenues, costs, and expenses for a certain period, and the statement of cash flows which provides a summary of cash in and cash out of the firm. 2. Explain the statement of cash flow and why it is important. The statement o cash flow is a summary of all cash in and cash out of a particular firm over a given period of time. This is a very important document because it keeps track of payments received from customers and payments made to creditors, which
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Unformatted text preview: gives an indication of the financial health of the firm. 3. Explain why is it important that accounting reports be prepared according to specific procedures (GAAP). If all firms prepared their accounting documents in their own way, it would be nearly impossible to compare one firm to another, or for other firms to prepare to buy one another. By keeping all documents in a standard form, it allows businesses to see more clearly how others are doing in their field, as well as others. 4. What value do financial ratios offer in reviewing the financial performance of a firm? Financial ratios allow firms to compare with other firms that may not be doing business on as large of a scale as one another. Say one firm has profits of $1 Million, with $500,000 of assets, while another has profits of $4 Million with assets of $3 Million. The first firm had a better ratio of 2:1 versus 3:4 with the other firm, even thought the first firm only made $1 Million....
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BUS100_EM_17TMorrow - gives an indication of the financial...

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