407 ch questions

407 ch questions - Chapter 1: 1.1: what types of questions...

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Chapter 1: 1.1: what types of questions can be answered by analyzing financial statements? o Would an investment generate attractive returns? o What is the degree of risk inherent in the investment? o Should existing investment holdings be liquidated? o Will cash flows be sufficient to service interest and principal payments to support the firm's borrowing needs? o Does the company provide a good opportunity for employment, future advancement, and employee benefits? o How well does this company compete in its operating environment? o Is this firm a good prospect as a customer? 1.2: what is the difference between an annual report and a 10-K report? o Publicly held companies must file a 10-K with the SEC o 10-K Information is mandated by the SEC and contains uniform content, presented in the same order Components (in order): Business Properties Legal proceedings Submission of matters to a vote of security holders Market for registrant's common equity and related stockholders matters Selected financial data. .. o Annual report Contains 4 basic financial documents: Balance sheet or statement of financial position Income or earnings statement Statement of stockholder's equity Statement of cash flows 1.3: What are the particular items an analyst should review and study in an annual report, and what material should be read with caution? o The management discussion and analysis (MD&A), sometimes called "financial review", because it contains information that cannot be found in the financial data Content includes coverage of any favorable or unfavorable trends and significant events or uncertainties in the area of liquidity, capital resources, and the results of operations Internal and external sources of liquidity Any material deficiencies in liquidity and how they will be remedied Commitments for capital expenditures, the purpose of such commitments, and expected sources of funding Anticipated changes in the mix and cost of financing resources A breakdown of sales increases into price and volume components
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1.4: What organization has legal authority to set accounting policies in the United States? Does this
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407 ch questions - Chapter 1: 1.1: what types of questions...

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