Whereis the firm currently where is the firmgoing

Info icon This preview shows pages 12–14. Sign up to view the full content.

View Full Document Right Arrow Icon
Whereis the firm currently? Where IS the firmgoing? What isthe firm worth? To effectively analyze a company or infer its value, we must understand the company's business activities. Financial statements help us understand these business activities. These statements report on a company's performance and financial condition, and reveal executive management's privileged information and insights. Financial statements satisfy the needs of different users. The functioning of the accounting information system involves application of accounting standards to produce financial statements. Effectively using this information system involves making judgments, assumptions, and estimates based on data contained in the financial reports. The greatest value we derive from this informa- tion system as users of financial reports is the insight we gain into the business activities of the company under analysis. To effectively analyze and use accounting information, we must consider the business con- text in which the information is created - see Exhibit 1.1. Without exception, all companies plan business activities, finance those activities, invest in those activities, and then engage in operat- ing activities. Companies conduct all these activities while confronting business forces, includ- ing market constraints and competitive pressures. Financial statements provide crucial input for strategic planning. They also provide information about the relative success of those plans, which can be used to take corrective action or make new operating, investing, and financing decisions. Exhibit 1.1 depicts the business activities for a typical company. The outer (green) ring is the planning process that reflects the overarching goals and objectives of the company within which strategic decisions are made. Those strategic decisions involve company financing, asset manage- ment, and daily operations. Apple, Inc., the focus company in Module 2, provides the following description of its business strategy in its annual report: STEP 1-BUSINESS ENVIRONMENT AND ACCOUNTING INFORMATION Reporting on Business Activities Business Strategy The Company is committed to bringing the best user experience to its customers through its innovative hardware, software, peripherals, services, and Internet offer- ings. The Company's business strategy leverages its unique ability to design and develop its own continued
Image of page 12

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
continued from prior page Module 1 I Framework for Analysis and Valuation 1-6 operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design. The Company believes continual investment in research and development is critical to the development and enhancement of innovative products and technologies. In conjunction with its strategy, the Company continues to build and host a robust platform for the discovery and delivery of third-party digital content and applications through the iTunes Store ... The Company
Image of page 13
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern