财务报表分析(英文版)

1、_a. measuring business incomea. explainwhy financialstatementsare preparedat theend of the regularaccounting period.major financial statements:the balance sheet: provides a snapshot of the firms financial condition.the income statement: reports on the performance of the firm.the statement of cash fl

2、ows: reports the cash receipts and cash outflowsclassified according to operating, investment and financing activities.the statement of stockholders equity: reports the amounts and sources ofchanges in equity from transactions with owners.thefootnotesofthefinancialstatements:allowusestoimproveassess

3、mentoftheamount,timinganduncertaintyoftheestimatesreported in the financial statements.the most accurate way to measure the results of enterprise activity would be tomeasurethem at the time of the enterpriseseventualliquidation.business,government,investors,and various otheruser groups,however,canno

4、twaitindefinitelyforsuchinformation.ifaccountantsdidnotprovidefinancialinformation periodically, someone else would.精品资料_the periodicityor timeperiodassumptionsimplyimpliesthat theeconomicactivities of an enterprisecan be divided into artificial time periods.these timeperiods vary, but the most comm

5、on are monthly, quarterly, and yearly.the informationmustbe reliableand relevant . this requiresthat informationmust be consistent and comparable over time and also be provided on a timelybasis. the shorter the time period, the more difficult it becomes to determine theproper net income for the peri

6、od. a months results are usually less reliable thana quarters results, and a quarters results are likely to be less reliable than ayearsresults.investorsdesireanddemandthatinformationbequicklyprocessedand disseminated;yet the quickerthe informationis released,themore it is subject to error. this phe

7、nomenon provides an interesting example ofthe trade-off between relevance and reliability in preparing financial data.in practice, financial reporting is done at the end of the accounting period.accounting periods can be any length in time. firms typically use the yearas the primaryaccountingperiod.

8、the 12-monthaccountingperiodisreferred to as the fiscal year. firms also report for periods less than a year(e.g. quarterly) on an interim basis.精品资料_accountingperiodmustbe of equallength.financialstatementsareprepared at the end of the regular accounting period to allow comparisonacross time.user c

9、ommentsposted by jeanette 2003-10-25 14:15:45.same period - allow comparisionbasic assumption in preparing financial statements is - the firm will continue inoperation,- going concern,assigning revenue - expenses - base on matching principleposted by gigi 2004-01-29 06:25:01.remember that there are

10、4 types of financial statementsb. explain why the accounts must be adjusted at the end of each period.why?mostexternaltransactionsarerecordedwhentheyoccur.theemployment of an accrual system means that numerous adjustments arenecessarybeforefinancialstatementsarepreparedbecausecertainaccounts are not

11、 accurately stated.精品资料_some external transactions might not even seem like transactions and arerecognizedonly at the end of the accountingperiod.examplesincludeunrecorded revenues and credit purchase.someeconomicactivitiesdonotoccurastheresultofexternaltransactions. examples include depreciation an

12、d the expiration of prepaidexpenses.timing:often a transactionaffectsthe revenueor expensesof two ormore accountingperiods.the relatedcash inflowor outflowdoes notalways coincide with the period in which these revenue or expense itemsare recorded.thus,the need for adjustingentriesresultsfrom timingd

13、ifferences between the receipt or disbursement of cash and the recordingof revenue or expenses. for example, if we handle transactions on a cashbasis, only cash transactions during the year are recorded. consequently,if a companysemployees are paid every two weeks and the end of anaccounting period

14、occurs in the middle of these two weeks, neither liabilitynor expense has been recorded for the last week. to bring the accountsup to datefor the preparationof financialstatements,boththe wageexpense and the wage liability accounts need to be increased.a necessarystep in the accountingprocess,then,i

15、s theadjustmentof allaccounts to an accrual basis and their subsequent posting to the general ledger.精品资料_adjustingentriesarethereforenecessaryto achieveapropermatchingofrevenues and expenses in the determination of net income for the current periodand to achieve an accurate statement of the assets

16、and equities existing at theend of the period.adjustment principlesthe revenue recognition principlethe matching principlewhat to adjust?each adjustingentryaffectsboth a real account(assets,liability,or ownersequity) and a nominal or income statement account (revenue or expense). thefour basic types

17、 of adjusting entries are:1. deferred expenses that benefits more than one period: for example, prepaid expenses (e.g. prepaid insurance, rent) are expenses paid in advance and recorded as assets before they are used or consumed. when these assets are consumed, expenses should be recognized: a debit

18、 to an expense account and a credit to an asset account. another example is depreciation. the cost of a long-term asset is allocated as an精品资料_expenseoverits usefullife.at theendof eachperioddepreciationexpense is recorded through an adjusting entry: a debit to a depreciationexpense account and a cr

19、edit to an accumulated depreciation account (acontra accountused to total the past depreciationexpenseson specificlong-term assets).2. accrued expenses that incurred but not yet paid or recorded: examples are employee salaries and interest on borrowed money. at the end of the accounting period, the

20、accrued expense is recorded through an adjusting entry: a debit to an expense account (i.e. salaries expense) and a creditto a liability account (i.e. salaries payable).3. accrued revenues that earned but not yet received or recorded: also called unrecorded revenues. examples include interest revenu

21、es, rent revenues,etc. such revenues accumulate with the passing of time, but the firm mayhave not receivedthe paymentor billedthe client.an adjustingentryshould be:a debit to anasset account (i.e. accountsreceivable) and acredit to a revenue account (i.e. interest revenue).精品资料_4. unearned revenues

22、 that are revenues received in cash before delivery of goods/services: examples are magazine subscription fees, customer deposits for services. these revenues are not earned yet and thus should be recorded as liabilities. an adjusting entry should be: a debit to a liability account (i.e. unearned re

23、venue) and a credit to a revenue account (i.e. revenue).user commentsposted by gigi 2004-01-29 06:26:22.accrual system! definitionposted by gina 2004-02-03 22:17:33.accrual based accounting recognizes the impact of a business event as it occurs,regardless of whether transaction affected cashposted b

24、y gina 2004-02-03 22:20:20.revenue principle: basis for recording revenues (ie tells when to record revenueand the amounts).matching principle: basis for recording expensis (ie direction to id all expensesduring the period, measure them, and match them against the revenues earnedin that period).精品资料

25、_c. explainwhy the accrual basis of accountingproducesmore useful incomestatements and balance sheets than the cash basis.revenue is something earned through the sale of goods or services. not all cashreceipts are revenues; for example, cash received through a loan is not revenue.expenses are the co

26、st of goods or services used to generate revenues. not allcash payments are expenses; for example, cash dividends paid to stockholdersare not expenses.net income is the difference between revenues and expenses.it is reportedon the income statement,and is the focus in evaluatinga firmsprofitability.m

27、ost companies use theaccrual basis accounting, recognizing revenue when itis earned(thegoodsaresoldor theservicesperformed)andrecognizingexpenses in the period incurred, without regard to the time of receipt or paymentof cash. net income is revenue earned minus expenses incurred.under the strictcash

28、 basis accounting, revenue is recorded only when the cashis received and expenses are recorded only when the cash is paid. net income iscash revenueminus cash expenses.the matchingprincipleis ignoredhere,resulting inconformity with generally accepted accounting principles.精品资料_todays economy is cons

29、iderably more lubricated by credit than by cash. and theaccrualbasis,notthecashbasis,recognizesallaspectsofthecreditphenomenon.investors,creditors,andotherdecisionmakersseektimelyinformationabout an enterprisesfuture cash flows. accrualbasis accountingprovides this informationby reporting the cash i

30、nflows and outflows associatedwith earningsactivities as soon as these cash flows can be estimated with anacceptabledegreeof certainty.receivablesand payablesare forecastersoffuture cash inflows and outflows. in other words, accrual basis accounting aids inpredicting future cash flows by reporting t

31、ransactions and other events with cashconsequences atthe timethe transactions andevents occur, rather thanwhenthe cash is received and paid. accrual accountinggenerallyprovidesa betterindication of performancethan cash basis of accountingsince it increasesthecomparability of income statements and ba

32、lance sheets across periods.b. financial reporting and analysisa. define each asset andliability category onthe balance sheet andprepare aclassified balance sheet.精品资料_think of thebalance sheetas a photo of the business at a specific point in time.it presents the assets, liabilities, and the equity

33、ownership of a business entity asof a specific date.assets are the economic resources controlled by the firm.liabilities are the financial obligations that the firm must fulfill in the future.liabilitiesare typically fulfilledby payment of cash. they representthesource of financing provided to the f

34、irm by the creditors.equityownershipisthe ownersinvestmentsandthetotalearningsretained from the commencement of the firm. equity represents the sourceof financing provided to the firm by the owners.balance sheet accounts are classified so that similar items are grouped togetherto arrive at significa

35、ntsubtotals.furthermore,the material is arrangedso thatimportant relationships are shown.the table below indicates the general format of balance sheet presentation:balance sheet classifications精品资料_assetsliabilities and owners equitycurrent assetscurrent liabilitieslong-term investmentslong-term deb

36、tproperty, plan and equipmentowners equityintangible assetscapital stockother assetsadditional paid-in capitalretained earningscurrent assets:they are cash and other assets expectedto be convertedinto cash, sold, orconsumed either in one year or in the operating cycle, whichever is longer. theoperat

37、ingcycle is the averagetime between the acquisitionof materialsandsupplies and the realization of cash through sales of the product for which thematerialsand supplieswere acquired.the cycle operatesfrom cash throughinventory,production,and receivablesback to cash. where there are severaloperating cy

38、cles within one year, the one-yearperiod is used. if the operatingcycle is more than one year, the longer period is used.精品资料_current assets are presented in the balance sheet in order of liquidity. the fivemajor items found in the current asset section are:cash: valued at its stated value. cash res

39、trictedfor purpose other thanpayment of current obligations or for use in current operations should beexcluded from the current asset section.marketable securities:also referred to as marketable securities. valued atcost or lower of cost and market.accountsreceivables:amountsowedto the firm by its c

40、ustomersforgoods and services delivered. valued at the estimated amount collectible.inventories: products that will be sold in the normal course of business.prepaidexpenses :theyareexpendituresalreadymadeforbenefits(usually services)to be received within one year or the operating cycle,whichever is

41、longer. typical examples are prepaid rent, advertising, taxes,insurance policy, and office or operating supplies. they are reported at theamount of un-expired or unconsumed cost.long-term investments:often referred to simply as investments, they are to be held for many years, andare not acquired wit

42、h the intention of disposing of them in the near future.investmentsin securitiessuch as bonds,commonstock,or long-termnotes that management does not intend to sell within one year.精品资料_investments in tangible fixed assets not currently used in operations, suchas land held for speculation.investments

43、set aside in special funds such as a sinking fund, pensionfund, or plant expansion fund. the cash surrender value of life insuranceis included here.investments in non-consolidated subsidiaries or affiliated companies.property, plant, and equipment:they are propertiesof a durable nature used in the r

44、egular operationsof thebusiness. with the exception of land, most assets are either depreciable (such asbuilding) or consumable.intangible assets:they lack physicalsubstanceand usually havea high degree of uncertaintyconcerningtheirfuture benefits.theyincludepatents,copyrights,franchises,goodwill,tr

45、ademarks,trade names,secret processes,and organizationcosts.generally, all of these intangibles are written off (amortized) to expense over 5 to40 years.other assets:精品资料_theyvary widelyin practice.examplesincludedeferredcharges(long-termprepaid expenses), non-current receivables, intangible assets, assets in specialfunds, and advances to subsidiaries.current liabilities:they are obligations that are reasonably expected to be liquidated either throughthe use of current assets or the creation of other