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Unformatted text preview: S U M M A RY O F D E C I S IO N T O O L KI T S Decision Checkpoints Info Needed for Decision Tool to Use for Decision How to Evaluate Results CHAPTER 1 (p 29) Are the companys Statement of earnings The statement of earnings If the companys revenue operations profitable? reports on the success or failure exceeds its expenses, it will of the companys operations re p o rt net earnings; otherwise by reporting its revenues and it will report a net loss. and expenses. What is the companys Statement of retained earnings How much of this years earnings A company striving for policy toward dividends did the company pay out in rapid growth will pay a low and growth? dividends to shareholders? dividend. Does the company rely Balance sheet The balance sheet reports the Compare the amount of debt primarily on debt or companys resources and claims versus the amount of shareholders equity to to those resources. There are shareholders equity to finance its assets? two types of claims: liabilities determine whether the and shareholders equity. company relies more on creditors or owners for for its financing. Does the company Statement of cash flows The statement of cash flows Compare the amount of cash generate sufficient cash shows the amount of cash provided by operating from operating activities provided or used by operating activities with the amount to fund its investing activities, investing activities, of cash used by investing activities? and financing activities. activities. Any deficiency in cash from operating activities must be made up with cash from financing activities. CHAPTER 2 (p 79) Is the company using its Net earnings and average assets Higher value suggests assets effectively? favourable efficiency (use of assets). Is the company Net earnings and net sales Higher value suggests maintaining an adequate favourable return on each margin between sales each dollar of sales. and expenses? Can the company meet Current assets and current Higher amount indicates its short-term obligations? liabilities liquidity. Higher ratio indicates favourable liquidity. Current liabilities and cash A higher ratio indicates provided (used) by operating liquiditythat the company activities is generating cash sufficient to meet its short-term needs. Can the company meet its Total debt and total assets Lower value indicates long-term obligations? favourable solvency. Total liabilities and cash A higher ratio indicates provided (used) by operating solvencythat the company activities is generating cash sufficient to meet its long-term needs. CHAPTER 3 (p 139) Has an accounting Details of the event Accounting equation Determine the effect, if any, transaction occurred? on assets, liabilities, and shareholders equity....
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- Spring '11
- Financial Accounting