This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Answers to discussion questions. Give examples of external and internal users of financial statements: 1-9 Internal users Owners managers employees directors internal auditors External users: investors creditors suppliers customers regulators government agencies What are the 4 main business activities and describe them: 1-10 A business pursues four major activities in a desire to provide a saleable product and/or service and to yield a satisfactory return on investment. These activities are: Planning activities-A company implements specific goals and objectives- goals and objectives are captured in its business plan-describes the company's purpose, strategy, and tactics-The business plan assists managers in focusing their efforts and identifying expected opportunities and obstacles. Financing Activities . -Financing activities are the means companies use to pay for these ventures-There are two main sources of business financing: equity investors (referred to as owner financing) and creditors (referred to as non-owner financing). Investing Activities . -the means a company uses to acquire and maintain investments for purchasing, developing, and selling products and services-Financing provides the funds necessary for acquisition of investments -include land, buildings, equipment, inventories, human capital Operating Activities . -represent the carrying out of the business plan given necessary financing and investing. -involves several basic functions such as research, purchasing, production, marketing, and labor. -Operating activities are a company's primary source of income. -Step one is the company's formulation of plans and strategies. -obtain necessary financing from equity investors and creditors-Financing is used to acquire investments in resources to produce goods or services. -The company uses these investments to undertake operating activities. is past trend a good predictor of future trends? 1-18 -Past trend often is a good predictor of the future if all relevant variables remain constant-In practice, however, this is seldom the case -Trend analysis will, in most cases, reveal the direction of change in operating performance along with the velocity and the magnitude of change. 2-11 Explain historical cost and fair value models of accounting. what explains the move towards fair value accounting? Historical Cost Model-asset and liability values are determined from past prices Fair Value-asset and liability values are determined on the basis of their fair values (typically market prices) -Under historical cost method, values change it impairs the usefulness of the financial statements 2-15 What are 4 limitations of financial statements?-they are not timely: financial statements are released well after the end of the quarter -only released on a quarterly basis-financial statements have little forward-looking information....
View Full Document
This note was uploaded on 07/02/2011 for the course FINA 470 taught by Professor Austin during the Spring '11 term at South Carolina.
- Spring '11