kuaiji002 - 0 r 1 Describe and construct the balance sheet...

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0 r- 1. Describe and construct the balance 4. Explainrevenue recognition, accrual m m sheet and understand how it can accounting, and their effects on ",:llo be used for analysis. (p. 40) retained earnings. (p. 50) m::D (')Z 2. Use the financial statement effects template 5. Illustrateequity transactions and the -4- (FSET)to analyze transactions. (p. 47) statement of stockholders' equity. (p. 56) _z <C) 3. Describe and construct the income 6. Use journal entries and T-accounts to m statement and discuss how it can analyzeand record transactions. (p. 57) (II be used to evaluate management performance. (p. 49) 7. Compute net working capital, the current ratio, and the quick ratio, and explain how they reflect liquidity. (p, 67)
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C HAP T E R Constructing Financial Statements More than a hundred years have passed since Charles R. Walgreen, Sr. purchased his first pharmacy in 1901. In that time, the company that bears his name-Walgreen Co.-has grown remarkably, open- ing its 7,00Oth drugstore in the fall of 2009. Walgreens operates drugstores in 50 states, the District of Columbia, Guam, and Puerto Rico; it has more than 238,000 employees; and it fills more than 18% of the retail prescriptions in the United States. The year 2009 marked the 16th consecutive time that Walgreens was named to Fortune's list of Most Admired Companies in America. Even with such a significant presence, Walgreens faces a number of challenges. The economic changes of the recent past have made consumers more cautious and cost-conscious. Pharmacy sales constitute 65 percent of Walgreens' sales, and it faces rising costs for pharmaceuticals and increasing competition from other drugstore chains like CVS Caremark Corporation and discount retailers like Wal-Mart Stores, Inc. Government health care reforms have the potential to reshape the landscape for providers of health products and services like Walgreens. These factors contributed to a drop in profits in 2009, even though sales revenue increased by 7%. New Chief Executive Officer, Gregory D. Wasson, must find a strategy for profitable growth. The company has slowed the rate of new store openings and turned its focus to cost controi and operat- ing efficiencies. As we discovered in Chapter 1, companies like Walgreens prepare financial statements annually. These financial statements allow investors and creditors to assess the impact of changing economic conditions on the company's financial health and performance. . This chapter will introduce and explain financial statements using Walgreens as its prime example. The chapter also introduces some key accounting procedures such as transaction analysis, journal entries, and posting. The general ledger, key accounting assumptions, and basic accounting defini- tions are also introduced. WALGREENS www.walgreens.com . Sources: "In the beginning ... " Walgreens history on thecorporate Web site; Walgreen Co. and Subsidiaries 2009 annual report; Fortune magazine Web site.
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