It is easier to evaluate a firm using its financial statements when the firm: is

Question

It is easier to evaluate a firm using its financial statements when the firm: is global in nature. tends to have one-time events such as asset sales and property acquisitions. is a conglomerate. has a different fiscal year than other firms in its industry. uses the same accounting procedures as other firms in its industry. Which one of these is a non-cash item? current taxes depreciation dividends selling expenses interest expense Which one of these is a correct definition? Long-term debt is defined as a residual claim on a firm’s assets. Current assets are assets with short lives, such as inventory. Current liabilities are debts that must be repaid in 18 months or less. Net working capital equals current assets plus current liabilities. Tangible assets are fixed assets such as patents Which one of these accounts is included in net working capital? common stock inventory long-term debt copyright manufacturing equipment Which one of the following accounts is included in stockholders' equity? accumulated retained earnings intangible assets deferred taxes long-term debt plant and equipment

Explanation / Answer

Financial statements presents relevant financial information about the company. such as a balance sheet is a financial statement and provide financial information about assets and liabilities, profit and loss statement provide information abount the operations of company what are the transactions of business are goint on, how is it earning income and what are the expenses. cash flow statement provides information abount cash outgoing and incoming it provides detailed information about cash transactions of the business such as daily cash transactions.

The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.If financial statements are issued strictly for internal use, there are no guidelines, other than common usage, for how the statements are to be presented. accounting firms uses different acocunting procedures for their conveyance.

Depreciation and dividends are non cash items. because these expenses are not to be paid in cash and no cash is outgoing from these expenses. these are sure expenses but their effect is not on cash disbursement. these are charged from the asset value directly. these only effect asset value. dividends shares income or expenses on shares but it is not a expense which effect cash .

long term debt is a residual claim on firm's assets.it consists of loans and financial obligations more then one year. a company takes long term debt to acquire immediate capital.

current assets are assets which are a short span of time within a year. these are the assets which are to be converted in immediate cash when required. such as inventory. when cash is needed inventory is to be sold and converted it in immediate cash within a short span of time.

current liabilities are company's dues or obligations which are to be paid within a short span of time i.e. within one year time. these are settled within a fiscal year.

net working capital = current assets- current liabilities. it is the difference between current assets and current liabilites of a business. it is used to measure the short term liquidity of business.

- Tangible assets include both fixed assets as well as current assets. tangible assets are the assets which are physical and which can be seen and touch such as plant, machinery, inventory, cash etc.

Net working capital is the difference between current assets and current liabilities. common stock, inventory included in calculation of new working capital because these are current assets and included in the definition of current assets. while long term debt is included in long term assets or non current liabilites, and copyright is a non current asset and not included in current asset. and manufacturing equipment is a type of fixed asset and outside the definition of current assets.

stockholders equity is the value of stockholders interest in company. stockholders equity includes accumulated retained earnings, long term debt, plant & equipment.

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