3 many introductory students have difficulty

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3. Many introductory students have difficulty differentiating between cash collections and revenue and between cash disbursements and expenses. It is critical that these differentiations are made when discussing the income statement versus the operating activities section of the statement of cash flows. 4. It is critical to students’ understanding of accounting and how to use financial statement information that they grasp how the four financial statements relate. However, most students often view each financial statement as independent and do not appreciate how the statements relate. Therefore, explain and demonstrate how the financial statements are linked together and complement one another. 5. When first discussing how to use the information in the financial statements, provide a general overview of how a potential investor would ascertain the company’s solvency (i.e., compare its assets to its obligations) and earning power. Then provide a more detailed discussion by using a classified balance sheet (i.e., using current assets versus current liabilities), the income statement, the statement of cash flows, and ratio analysis. OUTSIDE ASSIGNMENT OPPORTUNITIES Study of annual reports: evaluation of profitability and solvency using financial statements and other information. 1. Obtain a recent annual report for a local publicly held company. Read the financial statements and notes and evaluate profitability and solvency using concepts developed in the chapter. Read the letter to shareholders and other information in the annual report and compare with the results of your analysis; especially note instances where the letter to shareholders or the other information reads more favorably than indicated in the financial statements. Report your findings in writing and/or in a brief presentation to the class. Comparative study of annual reports: a foreign company compared to a U.S. company.
Full file at 2. Obtain a recent annual report for a publicly held foreign company. Compare the form, content, and terminology used in its financial statements to that of a U. S. public company, preferably one in the same industry. Report your findings in writing and/or in a brief presentation to the class. ANSWERS TO IN-TEXT DISCUSSION QUESTIONS Page No. 31. Cash provided by operating activities includes cash collected from the sale products and cash payments for related costs and expenses. Investing activities consist of capital expenditures for additional plant and equipment and other assets that relate to the productive capacity of the business. Financing activities include proceeds from the issuance of debt and/or equity, and related repayments of debt and/or payment of dividends. 34. McDonald’s Corporation’s total assets consist mostly of property, plant, and equipment because McDonald’s is a traditional “brick and mortar” business, whereas Google is an internet company whose presence exists mostly in cyberspace and which is valued mostly for it’s intangible assets and intellectual property. 34.

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