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306-Book - Table of Contents Framework for Accounting 306.1...

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Table of Contents Framework for Accounting 306 ......................................................................................................... 1 1 Type chapter title (level 2) ............................................................................................................... 2 Type chapter title (level 3) .............................................................................................................. 3 Type chapter title (level 1) .................................................................................................................. 4 Type chapter title (level 2) ............................................................................................................... 5 Type chapter title (level 3) .............................................................................................................. 6
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45 Framework for Accountancy 306 Chapter 1  discusses the accounting profession, the institutional framework that develops the  principles and standards for financial accounting and reporting, the usefulness of accounting  information for decision making, the contents of the annual report, and other sources of  information that are useful for decision making. Chapter 2  discusses the following financial statements: 1. Balance sheet; 2. Income statement; 3. Statement of stockholders’ equity; and 4. Statement of cash flows Chapter 3  discusses the various tools used for the following analyses: 1. Short-term liquidity 2. Long-term liquidity 3. Profitability Chapter 4  covers the analysis of a company’s long-term liquidity—a firm’s ability to pay the  principal and interest on its long-term obligations. Chapter 5  covers the analysis of a company’s profitability—a firm’s ability to earn an  attractive rate of return on its assets and stockholders’ equity.  Chapters 1 and 2 contain basic information about what is reported in a company’s financial  statements and in its annual report. This is the information that will be used to help make  credit and investment decisions in chapters 3-5. Chapter 3 provides tools for creditor and  investor analyses. Chapter 3 also includes the analysis of a company’s short-term liquidity—a 
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45 firm’s ability to pay its current liabilities with assets generated from the operating cycle.  Chapters 3 through 5 show how information contained in the financial section of a company’s  annual report can be used to make credit and investment decisions. Chapter 1 Accounting Standards and the Usefulness of Accounting Information for Making Credit and Investment Decisions  Financial information for a business  entity-usually a consolidated entity in  which several corporations are  reported as one business entity. The controller of the business entity  prepares the financial statements and  note disclosures. Primary Financial statements: Statement of income Statement of financial position  (balance sheet) Statement of cash flows
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Inputs into the Decision-making Process Financial statements are audited by  external auditors. These auditors  express their opinion on the financial  Users of financial statements:  investors, creditors, and others Investors, creditors, and  other users make  decisions to: Buy, hold, sell stock Extend credit Sell inventory Ask for a raise or  increase in pension  Financial Statements Economic  Environment Managerial  Talent
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