pptchapter5 - Learning Objectives Balance Sheet Statement...

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Slide 5-1 UCSB, Anderson Balance Sheet & Statement of Cash Flows Chapter 5 Slide 5-2 UCSB, Anderson 1. Identify the uses and limitations of a balance sheet. 2. Identify the major classifications on the balance sheet. 3. Prepare a classified balance sheet using the account format . (Not using the report format from the text) 4. Identify balance sheet information requiring supplemental disclosure. 5. Identify major balance sheet disclosure techniques.font 6. Explain the purpose of the statement of cash flows. 7. Identify the content of the statement of cash flows. 8. Not preparing a statement of cash flows as per text. 9. Understand the usefulness of the statement of cash flows. Learning Objectives Slide 5-3 UCSB, Anderson Balance Sheet Basics What is a balance sheet? Tells where the entity stands financially; “AS OF”; Better way to think of it is as a “Statement of Financial Position” Transaction based. Something has to actually HAPPEN first Historical cost basis Important Fact: Inherently relies upon estimates. Example: Valuation of receivables and inventories; Goodwill valuation; Completeness of reported impairments; Comparative balance sheet analysis is a substantial tool in understanding whether the Company is improving or deteriorating. Slide 5-4 UCSB, Anderson No Statement Stands on it’s Own ALL OF THE STATEMENTS AND NOTES ARE INTERDEPENDANT The balance sheet needs an income statement and a statement of cash flows and note disclosure to tell a complete picture… Think of the “self balancing” aspect. If you debit a/r and credit sales, then you need to see the balance sheet AND the income statement to have the complete picture. For instance if a Company generates $1,000,000 of net income, and their total average equity for the year was $1.75, would you be impressed?. ... What about if their average equity was $100 billion? What if a Company had operating income on the income statement but showed negative cash flows from operating activities on the statement of cash flows– might you want to know why?
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Slide 5-5 UCSB, Anderson Some important balance sheet tools and terms
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This note was uploaded on 12/25/2011 for the course ECON 136A taught by Professor Anderson during the Fall '08 term at UCSB.

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pptchapter5 - Learning Objectives Balance Sheet Statement...

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