What is the annual report, and what two types of information does
it provide?
What four financial statements are typically included in the annual
report?
Why is the annual report of great interest to investors?
What is the balance sheet, and what information does it provide?
How is the order of the items shown on the balance sheet
determined?
A company has $2 million of cash and equivalents, $2 million of
inventory, $3 million of accounts receivable, $3 million of accounts
payable, $1 million of accruals, and $2 million of notes payable.
What is its net working capital? ($1 million)
Why might Allied’s December 31 balance sheet differ from its June
30 statement?
What is an income statement, and what information does it provide?
Why is earnings per share called “the bottom line”?
Differentiate between amortization and depreciation.
What are EBIT, operating income, and EBITDA?
Which is like a snapshot of the firm’s operations the balance sheet
or the income statement and which is more like a movie? Explain.
How do we estimate net cash flow, and how does it differ from
accounting profit?
In accounting, the emphasis is on net income. In finance, the pri mary emphasis is on cash flow. Why is this so?
What is the statement of cash flows, and what are some questions it
is designed to answer?
If a company has high cash flows, does this mean that its cash and
equivalents will also be high? Explain.
Identify and briefly explain the three types of activities shown in the
statement of cash flows.
What is the statement of retained earnings, and what information
does it provide?
Why do changes in retained earnings occur?
Explain why the following statement is true: “The retained earnings
account reported on the balance sheet does not represent cash and is
not ‘available’ for dividend payments or anything else.”
Can an investor have complete confidence that the financial statements of different companies are accurate and that the data reported by one company are truly comparable to the data provided by another?
Why might different companies account for similar transactions in
different ways?