Some_Lessons_About_Using_Financial_Statement_Analysis -...

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Some Lessons about Using Financial-Statement Analysis Experience with financial statements eventually teaches caution. No matter how important it is for the general manager to assess financial statements, their interpretation may not be as straightforward as first appears: For most large corporations, audited financial statements are not exact. Virtually no auditors count every item in inventory or check every sales receipt. The value of oil reserves in the ground or stands of timber is estimated and reported conservatively. Bad debts are a matter of judgment. The key point is that the preparation of financial reports involves a relatively high degree of judgment and estimation. Managers have relatively wide latitude in choosing accounting policies that underlie financial-statement preparation. When should a sale be recognized? How should inventory or the cost of goods be valued (LIFO or FIFO)? Should a payment be recognized as an expenditure or an expense? When should asset values be written off
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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Some_Lessons_About_Using_Financial_Statement_Analysis -...

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