ch05 - Chapter 5-1 C H A P T E R C H A P T E R 5 5 BALANCE...

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Unformatted text preview: Chapter 5-1 C H A P T E R C H A P T E R 5 5 BALANCE SHEET AND STATEMENT OF BALANCE SHEET AND STATEMENT OF CASH FLOWS CASH FLOWS Intermediate Accounting Prof. Volkan Muslu Chapter 5-2 Chapter 5-3 Chapter 5-4 Chapter 5-5 Evaluating the capital structure. Assess risk and future cash flows. Analyze the companys: Liquidity (convertibility to cash), Solvency (ability to pay its debt), and Financial flexibility (ability to raise cash in times of unexpected needs and opportunities). Companies that defaulted in the recent crisis: Bear Stearns, Lehman Brothers, Merrill Lynch, Wachovia Bank, AIG, Fannie Mae, Freddie Mac, General Motors, Chrysler, many hedge funds Mostly because of little financial flexibility. Balance Sheet Balance Sheet Usefulness of the Balance Sheet LO 1 Explain the uses and limitations of a balance sheet. LO 1 Explain the uses and limitations of a balance sheet. Chapter 5-6 Most assets and liabilities are reported at historical cost. Use of judgments and estimates. Many items of financial value are omitted. Limitations of the Balance Sheet Balance Sheet Balance Sheet LO 1 Explain the uses and limitations of a balance sheet. LO 1 Explain the uses and limitations of a balance sheet. Chapter 5-7 Three General Classifications Assets, Liabilities, and Stockholders Equity Companies further divide these classifications: Classification in the Balance Sheet LO 2 Identify the major classifications of the balance sheet. LO 2 Identify the major classifications of the balance sheet. Balance Sheet Balance Sheet Illustration 5-1 Illustration 5-1 Chapter 5-8 Cash and other assets a company expects to convert into cash, sell, or consume either in one year or in the operating cycle, whichever is longer. Current Assets LO 2 Identify the major classifications of the balance sheet. LO 2 Identify the major classifications of the balance sheet. Balance Sheet Balance Sheet Illustration 5-2 Illustration 5-2 Chapter 5-9 Review Review The correct order to present current assets is The correct order to present current assets is a. a. Cash, accounts receivable, prepaid items, Cash, accounts receivable, prepaid items, inventories. inventories. b. b. Cash, accounts receivable, inventories, prepaid Cash, accounts receivable, inventories, prepaid items. items. c. c. Cash, inventories, accounts receivable, prepaid Cash, inventories, accounts receivable, prepaid items. items. d. d. Cash, inventories, prepaid items, accounts Cash, inventories, prepaid items, accounts receivable. receivable. Balance Sheet Balance Sheet LO 2 Identify the major classifications of the balance sheet. LO 2 Identify the major classifications of the balance sheet. Chapter 5-10 Generally any monies available on demand. Cash equivalents- short-term highly liquid investments that mature within three months or less....
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ch05 - Chapter 5-1 C H A P T E R C H A P T E R 5 5 BALANCE...

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