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Financial Statements, Chapter 20

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Provides information on financial statements such as the different types of financial statements, the balance sheet, etc.

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Financial Statements, Chapter 20

  1. 1. Financial Statements Chapter Twenty NACM
  2. 2. Types of Financial Statements <ul><li>Reporting Periods </li></ul><ul><ul><li>Cash accounting </li></ul></ul><ul><ul><li>Accrual accounting </li></ul></ul><ul><li>Role of Financial Statements </li></ul><ul><li>Annual Reports </li></ul><ul><li>Basic Financial Statements </li></ul>
  3. 3. Accounting Issues <ul><li>Generally Accepted Accounting Principles (GAAP) </li></ul><ul><li>Accounting Assumptions </li></ul><ul><li>Financial Accounting Standards Board (FASB) </li></ul><ul><li>Notes to Financial Statements </li></ul>
  4. 4. The Balance Sheet <ul><li>Overview </li></ul><ul><li>Definition: A balance sheet is a statement of a company’s financial position that contains specific details about major financial items of a company at a specific point in time. </li></ul>
  5. 5. Statement of Income <ul><li>Overview </li></ul><ul><li>Statement of income also called: Income Statement, Statement of Earnings, Statement of Operations </li></ul><ul><li>Statement of Income provides a summary of income and expenses, and gains and losses for a specific period of time </li></ul>
  6. 6. Statement of Retained Earnings <ul><li>Overview </li></ul><ul><li>Components </li></ul><ul><ul><li>Retained Earnings </li></ul></ul><ul><ul><li>Net Income </li></ul></ul><ul><ul><li>Dividends </li></ul></ul>
  7. 7. Statement of Cash Flows <ul><li>Overview </li></ul><ul><li>Cash Flows from Operating Activities </li></ul><ul><li>Cash Flows from Investing Activities </li></ul><ul><li>Cash Flows from Financing Activities </li></ul>
  8. 8. Other Financial Reports <ul><li>Trial Balance </li></ul><ul><ul><li>Limitations </li></ul></ul><ul><ul><li>Advantages </li></ul></ul><ul><li>Consolidated Financial Statements </li></ul><ul><li>Combined Financial Statements </li></ul><ul><li>Pro Forma Financial Statements </li></ul>
  9. 9. Audit Issues <ul><li>The Role of the Auditor </li></ul><ul><li>Types of Audits </li></ul><ul><li>Responsibility for Financial Reporting </li></ul><ul><li>Change in Auditor </li></ul><ul><li>Auditor-Client Relationships </li></ul>
  10. 10. Audit Reports <ul><li>Overview </li></ul><ul><li>Customary Schedules in Audit Reports </li></ul><ul><li>Unqualified Opinions </li></ul><ul><li>Qualified Opinions </li></ul><ul><li>Compilation </li></ul><ul><li>Reliability </li></ul>
  11. 11. False Financial Statements <ul><li>General Considerations </li></ul><ul><li>Continuing and Acceleration Clauses </li></ul><ul><li>Fraud </li></ul><ul><li>Points to Be Observed </li></ul>
  12. 12. Financial Analysis Fundamentals Chapter Twenty-one NACM
  13. 13. Learning Objectives <ul><li>How to analyze financial statements </li></ul><ul><li>How to interpret the statement of cash flows </li></ul><ul><li>The basics of using financial ratio analysis </li></ul><ul><li>Differences among various types of financial ratios </li></ul><ul><li>How to construct the DuPont formula </li></ul><ul><li>Major sources of comparative financial data </li></ul>
  14. 14. Financial Analysis Fundamentals <ul><li>Common-size Analysis </li></ul><ul><li>Statement of Cash Flows </li></ul><ul><li>Ratio Analysis </li></ul><ul><li>Using Industry Comparative Information </li></ul>
  15. 15. Common-Size Analysis <ul><li>Overview </li></ul><ul><li>Vertical Analysis </li></ul><ul><li>Horizontal Analysis </li></ul>
  16. 16. Statement of Cash Flows <ul><li>General Considerations </li></ul><ul><li>Analyzing the Statement of Cash Flows Prepared in the Indirect Method </li></ul><ul><li>Analyzing the Statement of Cash Flows Prepared in the Direct Method </li></ul>
  17. 17. Ratio Analysis <ul><li>Liquidity/Short Term Solvency </li></ul><ul><li>Profitability Ratios </li></ul><ul><li>Activity Ratios </li></ul><ul><li>Leverage Ratios </li></ul><ul><li>Other Ratios </li></ul>
  18. 18. Using Industry Comparative Information <ul><li>Sources of Industry Information </li></ul><ul><ul><li>Dun & Bradstreet </li></ul></ul><ul><ul><li>The Risk Management Association </li></ul></ul><ul><ul><li>Moody’s Investment Services </li></ul></ul><ul><ul><li>Standard and Poor’s Investment Services </li></ul></ul><ul><ul><li>Value Line </li></ul></ul><ul><li>Making Industry Comparisons </li></ul>
  19. 19. End of Session

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