Retained earning
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The document defines retained earnings as a statement showing how much of a firm's earnings were retained rather than paid out as dividends. The retained earnings statement reconciles the beginning and ending balances by showing increases from net income and decreases from dividends paid. Retained earnings are accumulated for purposes like funding fixed asset investments and meeting working capital needs. The calculation takes the beginning retained earnings, adds net income, and subtracts dividends paid to arrive at the ending retained earnings balance.
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Why are income statements and statement of cash flows dated similarl.pdf
Why are income statements and statement of cash flows dated similarly.
Solution
The statement of cash flows measures the sources of a company\'s cash and its uses of cash over
a specific time period. The income statement measures a company\'s financial performance, such
as revenues, expenses, profits or losses over a specific time period.
A cash flow statement shows exactly how much money a company has received and how much it
has spent, traditionally over a period of one year. It captures the current operating results and
changes on the balance sheet, such as increases or decreases in accounts receivable or accounts
payable, and does not include noncash accounting such as depreciation and amortization. A cash
flow statement is used to determine the short-term viability and liquidity of a company,
specifically how well it is positioned to pay its bills and vendors.
An income statement is the most common financial statement and shows a company\'s revenue;
total expenses, including noncash accounting such as depreciation; and profit or loss, over a
period of one year. An income statement is used to determine the financial performance of a
company, specifically how much revenue it made, how many expenses it paid, and the resulting
profit or loss from the revenue and expenses.
That\'s why these both statements are dated similarly..
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Overview of Financial Statements(I need help explaining the follow.pdf
Overview of Financial Statements
(I need help explaining the following and/or demonstrating it for my upcoming exam if anyone
could help me comprehend the concepts I would greatly appreciate it!!)
Describe and interpret the balance sheet, income statement, and statement of stockholder’s equity
Describe the relationship between current assets and current liabilities
Describe the difference between interest-bearing and non-interest-bearing liabilities
Explain the components of change on a statement of stockholder’s equity
Solution
Answer 1:
Balance Sheet:
Balance sheet is a financial statement that summarizes a company\'s assets, liabilities and
shareholders\' equity at a specific point in time. It is a Position Statement which give investors an
idea as to what the company owns and owes as well as the amount invested by shareholders. The
balance sheet adheres to the following formula: Assets = Liabilities + Shareholders\' Equity
Interpreting a Balance Sheet
The balance sheet is a snapshot, representing the state of a company\'s finances at a moment in
time. By itself, it cannot give a sense of the trends that are playing out over a longer period. For
this reason, the balance sheet should be compared with those of previous periods. A number of
ratios can be derived from the balance sheet, helping investors get a sense of how healthy a
company is. These include the debt-to-equity ratio and the acid-test ratio, along with many
others.
Income Statement:
An income statement also known as the \"profit and loss statement\" or \"statement of revenue
and expense\" is a financial statement that measures a company\'s financial performance over a
specific accounting period. Financial performance is assessed by giving a summary of how the
business incurs its revenues and expenses through both operating and non-operating activities. It
also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal
quarter or year.
Interpreting Income Statement
The income statement is divided into two parts: the operating and non-operating sections. The
portion of the income statement that deals with operating items is interesting to investors and
analysts alike because this section discloses information about revenues and expenses that are a
direct result of the regular business operations. The non-operating items section discloses
revenue and expense information about activities that are not tied directly to a company\'s
regular operations.
Stateent of Stockholders\' equity
Stockholders\' equity is the money attributable to a business\' owners, often referred to as
shareholders. It is also known as \"net assets,\" since it is equivalent to the total assets of a
company minus its liabilities, that is, the debt it owes to non-shareholders. The statement of
shareholders\' equity details the changes within the equity section of the balance sheet over a
designated period of time. In other words, the statement of stockholder\'s equity is a b.
What specific balance sheet account provides the link between the ba.pdf
What specific balance sheet account provides the link between the balance sheet and the income
statement? Thoroughly describe how this linkage works.
Solution
The Retained earnings account in the balance sheet provides the link to the income statement.
Retained earnings are the residual earnings left over after distributing the cash dividends to the
stock holders.
Closing retained earnings= Opening retained earnings + Net income - Cash dividends.
Net income is arrived from the income statement
Cash dividends are arrived at by the Board of directors
Opening retained earnings are the earnings carried forward from the previous years.
Closing retained earnings is added to the stockholders equity account and reflected in the
balance sheet.
The carrying of the net income to the balance sheet ensures there is uniform distribution of
accounts from the income statement to the balance sheet and also ensures balance of accounts.
Chapter 2 Financial Statements.ppt
This document discusses key financial statements and ratios used to evaluate company performance. It describes the three main financial statements - the balance sheet, income statement, and cash flow statement. The balance sheet provides a snapshot of company assets, liabilities, and equity on a given date. The income statement shows revenues and expenses over a period of time. The cash flow statement reports cash inflows and outflows. Financial ratios are calculated using numbers from the statements to analyze a company's financial health, like the current ratio from the balance sheet and net profit ratio from the income statement.
Financial AnalysisClass PracticeThe BA 620 IncorporatedBala.docx
Financial Analysis/Class Practice
The BA 620 Incorporated
Balance Sheet
The balance sheet presents a summary of a firm’s financial position at a given point in time.
The statement balances the firm’s assets (what it owns) against its financing, which can be either debt (what it owes) or equity (what was provided by owners).
Financial Analysis/Class Practice
The BA 620 Incorporated
Balance Sheet
Financial Analysis/Class Practice
The BA 620 Incorporated
Balance Sheet
Financial Analysis/Class Practice
The BA 620 Incorporated
Income Statements
The income statement provides a financial summary of a company’s operating results during a specified period.
Although they are prepared quarterly for reporting purposes, they are generally computed monthly by management and quarterly for tax purposes.
Financial Analysis/Class Practice
The BA 620 Incorporated
Income Statements
Financial Analysis/Class Practice
The BA 620 Incorporated
Statement of Retained Earnings
The statement of retained earnings reconciles the net income earned during a given year, and any cash dividends paid, with the change in retained earnings between the start and the end of that year.
Financial Analysis/Class Practice
The BA 620 Incorporated
Statement of Retained Earnings
Financial Analysis/Class Practice
The BA 620 Incorporated
Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance.
Interested parties:
Current and prospective shareholders are interested in the firm’s current and future level of risk and return, which directly affect share price.
Creditors are interested in the short-term liquidity of the company and its ability to make interest and principal payments.
Management is concerned with all aspects of the firm’s financial situation, and it attempts to produce financial ratios that will be considered favorable by both owners and creditors.
Financial Analysis/Class Practice
The BA 620 Incorporated
Types of Ratio Comparisons
Cross-sectional analysis is the comparison of different firms’ financial ratios at the same point in time; involves comparing the firm’s ratios to those of other firms in its industry or to industry averages
Benchmarking is a type of cross-sectional analysis in which the firm’s ratio values are compared to those of a key competitor or group of competitors that it wishes to emulate.
Comparison to industry averages is also popular, as in the following example.
Financial Analysis/Class Practice
The BA 620 Incorporated
Types of Ratio Comparisons
Time-series analysis is the evaluation of the firm’s financial performance over time using financial ratio analysis
Comparison of current to past performance, using ratios, enables analysts to assess the firm’s progress.
Developing trends can be seen by using multiyear comparisons.
The most informative approach to ratio analysis combines cross-sectional and time-series analyses.
Financial Analysis/Class Practice
The ...
Financial AnalysisClass PracticeThe BA 620 IncorporatedBala.docx
Financial Analysis/Class Practice
The BA 620 Incorporated
Balance Sheet
The balance sheet presents a summary of a firm’s financial position at a given point in time.
The statement balances the firm’s assets (what it owns) against its financing, which can be either debt (what it owes) or equity (what was provided by owners).
Financial Analysis/Class Practice
The BA 620 Incorporated
Balance Sheet
Financial Analysis/Class Practice
The BA 620 Incorporated
Balance Sheet
Financial Analysis/Class Practice
The BA 620 Incorporated
Income Statements
The income statement provides a financial summary of a company’s operating results during a specified period.
Although they are prepared quarterly for reporting purposes, they are generally computed monthly by management and quarterly for tax purposes.
Financial Analysis/Class Practice
The BA 620 Incorporated
Income Statements
Financial Analysis/Class Practice
The BA 620 Incorporated
Statement of Retained Earnings
The statement of retained earnings reconciles the net income earned during a given year, and any cash dividends paid, with the change in retained earnings between the start and the end of that year.
Financial Analysis/Class Practice
The BA 620 Incorporated
Statement of Retained Earnings
Financial Analysis/Class Practice
The BA 620 Incorporated
Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance.
Interested parties:
Current and prospective shareholders are interested in the firm’s current and future level of risk and return, which directly affect share price.
Creditors are interested in the short-term liquidity of the company and its ability to make interest and principal payments.
Management is concerned with all aspects of the firm’s financial situation, and it attempts to produce financial ratios that will be considered favorable by both owners and creditors.
Financial Analysis/Class Practice
The BA 620 Incorporated
Types of Ratio Comparisons
Cross-sectional analysis is the comparison of different firms’ financial ratios at the same point in time; involves comparing the firm’s ratios to those of other firms in its industry or to industry averages
Benchmarking is a type of cross-sectional analysis in which the firm’s ratio values are compared to those of a key competitor or group of competitors that it wishes to emulate.
Comparison to industry averages is also popular, as in the following example.
Financial Analysis/Class Practice
The BA 620 Incorporated
Types of Ratio Comparisons
Time-series analysis is the evaluation of the firm’s financial performance over time using financial ratio analysis
Comparison of current to past performance, using ratios, enables analysts to assess the firm’s progress.
Developing trends can be seen by using multiyear comparisons.
The most informative approach to ratio analysis combines cross-sectional and time-series analyses.
Financial Analysis/Class Practice
The.
Accounting for Managers/Management Accounting (Unit-2) by Dr. Abhay Singh Cha...
Accounting for Managers/Management Accounting (Unit-2) by Dr. Abhay Singh Cha...Dr. Abhay Singh Chauhan
This document discusses financial statements and the funds flow statement. It defines key terms like financial statements, current and non-current assets and liabilities, and working capital. It explains that a funds flow statement tracks changes in working capital from period to period. Sources of funds include internal sources like net profit and depreciation, as well as external sources like loans. Uses of funds include purchases of fixed assets, dividend payments, and debt repayments. The funds flow statement is prepared by adjusting net profit for non-cash items, tracking sources and uses of funds, and preparing a schedule showing changes in working capital accounts from one period to the next.Fundamentals of Financial Ratio Analysis
This document discusses financial ratio analysis and its importance. It outlines the different types of ratios including liquidity, activity, solvency, and profitability ratios. Liquidity ratios measure a company's ability to meet short-term obligations while activity ratios measure how efficiently a company uses its assets. Solvency ratios indicate a company's long-term debt obligations and profitability ratios measure how profitable a company is. The document also discusses evaluating earnings power, comparative statement analysis, and the limitations of ratio analysis.
Money and finance management chapter 3
This document outlines the key topics covered in a money and finance management course, including chapters on business accounting. Chapter 3 focuses on accounting and discusses the aim of accounting, which is to report financial information about a business's performance, financial position, and cash flow. It explains that accounting information is compiled into common financial statements like the income statement, balance sheet, statement of cash flows, and statement of retained earnings. The balance sheet section describes how a balance sheet categorizes a company's assets, liabilities, and shareholders' equity, with assets divided into current and fixed assets. It also provides a sample balance sheet formula showing that total assets must equal the sum of total liabilities and shareholders' equity.
Why is the Statement of Cash Flows Prepared- How is the Statement of C.docx
Why is the Statement of Cash Flows Prepared? How is the Statement of Cash Flows different from the Income Statement? What types of transactions are presented in each section?
Solution
The cash flow statement, or statement of cash flows, measures the sources of a company\'s cash and its uses of cash over a specific time period. The income statement, or statement of financial performance, measures a company\'s financial performance, such as revenues, expenses, profits or losses over a specific time period.
A cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. It captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting such as depreciation and amortization. A cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.
An income statement is the most common financial statement and shows a company\'s revenue; total expenses, including noncash accounting such as depreciation; and profit or loss, traditionally over a period of one month. An income statement is used to determine the financial performance of a company, specifically how much revenue it made, how many expenses it paid, and the resulting profit or loss from the revenue and expenses.
The cash flow statement is linked to the income statement by net profit or net burn. The profit or burn on the income statement becomes the first line of the cash flow statement and is used to calculate cash flow from operations. This is referred to as the indirect method. The direct method can also be used to prepare the cash flow statement, where the money received is subtracted from the money spent to calculate net cash flow
The Cash Flow Statement is divided into three distinct sections:
.
What is the simple formula for figuring Addition to Retained earn.pdf
What is the simple formula for figuring Addition to Retained earnings?
What is the simple formula for figuring Addition to Retained earnings?
Solution
Retained earnings is the amount of money that the company keeps aside for future. The aim of a
company is to maximize the wealth of the shareholders. The company provides dividends to the
shareholders to maximize their wealth. The retained earnings is calculated by subtracting the
dividends feom the net income. The amount of money that is left after the dividends are paid is
known as retained earnings. Any addition to retained earnings will be identified by the increase
in the value of the net income or decrease in the value of the dividends. The addition of retained
earnings will be clear when the dividends are less and net income is more.
Retained earnings = net income - dividends.
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accounting important regarding the importance of accounting in accounts
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Why are income statements and statement of cash flows dated similarl.pdf
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Final account, Balance sheet , trading ac , profit & loss ac
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Overview of Financial Statements(I need help explaining the follow.pdf
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What specific balance sheet account provides the link between the ba.pdf
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Retained earning
- 2. contents Definition Statement of retained earning Format of retained earning Purposes of retained earning Retained earning calculation Restricted or unrestricted
- 3. A statement reporting how much of the firm,s earnings were retained in the business rather than paid out in dividends. It is the sum of the annual retained earnings for reach year of the firm,s history.
- 4. The retained earnings statement reconciles the beginning and ending balances in the retained earnings account. This statement can be presented as a separate statement or in a combined statement of income and retained earnings. A company’s overall income net income will cause retained earnings to increase and a net loss will result in a decrease. Retained earnings is also reduced by shareholder dividends. The statement of retained earnings provides a succinct reporting of these changes in retained earnings from one period to the next. In essence, the statement is nothing more than a reconciliation or “bird’s eye view” of the bridge between the retained earnings amounts appearing on two successive balance sheets.
- 6. Accumulation of Earnings Investment in fixed assets To meet working capitals
- 7. The calculation is: + Beginning retained earning + Net income during the period - Dividends paid = Ending retained earnings The retained earning formula is also known as retained earnings equation
- 8. RETAINED EARNINGS: Retained earnings may be legal, contractual and voluntary. • UNRESTRICTED EARNINGS: Unrestricted earnings are free and can be declares as dividends.