完整word版財務(wù)報表分析英文版

1、A. Measuring Business Incomea. explain why financial statements are prepared at the end of the regular accounting 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 ca

2、sh flows: reports the cash receipts and cash outflows classified according to operating, investment and financing activities.The statement of stockholders equity: reports the amounts and sources of changes in equity from transactions with owners.The footnotes of the financial statements: allow uses

3、to improve assessment of the amount, timing and uncertainty of the estimates reported in the financial statements.The most accurate way to measure the results of enterprise activity would be to measure them at the time of the enterprises eventual liquidation. Business, government, investors, and var

4、ious other user groups, however, cannot wait indefinitely for such information. If accountants did not provide financial information periodically, someone else would.The periodicity or time period assumption simply implies that the economic activities of an enterprise can be divided into artificial

5、time periods. These time periods vary, but the most common are monthly, quarterly, and yearly.The information must be reliable and relevant. This requires that information must be consistent and comparable over time and also be provided on a timely basis. The shorter the time period, the more diffic

6、ult it becomes to determine the proper net income for the period. A months results are usually less reliable than a quarters results, and a quarters results are likely to be less reliable than a years results. Investors desire and demand that information be quickly processed and disseminated; yet th

7、e quicker the information is released, the more it is subject to error. This phenomenon provides an interesting example of the 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

8、be any length in time. Firms typically use the year as the primary accounting period. The 12-month accounting period is referred to as the fiscal year. Firms also report for periods less than a year (e.g. quarterly) on an interim basis.Accounting period must be of equal length. Financial statements

9、are prepared at the end of the regular accounting period to allow comparison across time.b. explain why the accounts must be adjusted at the end of each period. Why?Most external transactions are recorded when they occur. The employment of an accrual system means that numerous adjustments are necess

10、ary before financial statements are prepared because certain accounts are not accurately stated.Some external transactions might not even seem like transactions and are recognized only at the end of the accounting period. Examples include unrecorded revenues and credit purchase.Some economic activit

11、ies do not occur as the result of external transactions. Examples include depreciation and the expiration of prepaid expenses.Timing: Often a transaction affects the revenue or expenses of two or more accounting periods. The related cash inflow or outflow does not always coincide with the period in

12、which these revenue or expense itemsare recorded. Thus, the need for adjusting entries results from timing differences between the receipt or disbursement of cash and the recording of revenue or expenses. For example, if we handle transactions on a cash basis, only cash transactions during the year

13、are recorded. Consequently, if a companys employees are paid every two weeks and the end of an accounting period occurs in the middle of these two weeks, neither liability nor expense has bee n recorded for the last week. To bring the acco unts up to date for the prep arati on of financial statement

14、s, both the wage expense and the wage liability accounts need to be in creased.A necessarystep in the accounting process, then, is the adjustment of all accounts to an accrual basis and their subseque nt p osti ng to the gen eral ledger. Adjusti ng en tries are therefore n ecessaryto achieve a prope

15、r match ing of reve nues and expen sesi n the determ in ati on of net in come for the curre nt p eriod and to achieve an accurate stateme nt of the assets and equities existi ng at the end of the p eriod.Adjustme nt princip lesThe reve nue recog niti on principleThe match ing principleWhat to adjust

16、?Each adjusting entry affects both a real account (assets,liability, or owners equity) and a nominal or in come stateme nt acco unt (reve nue or expen se). The four basic types of adjust ing en tries are:deferred expen sesthat ben efits more tha n one p eriod: for exa mp le, prep aid expen ses(e.g.

17、prep aid in sura nee, rent) are expen ses p aid in adva nee and recorded as assets before they are used or con sumed. Whe n these assets are con sumed, ex pen ses should be recog ni zed: a debit to an expense acco unt and a credit to an asset acco unt. Ano ther exa mple is dep reciati on. The cost o

18、f a Iong-term asset is allocated as an expense over its useful life. At the end of each period dep reciatio n expen seis recorded through an adjust ing en try: a debit to a dep reciati on expense acco unt and a credit to an accumulated dep reciati on acco unt (a contra acco unt used to total the p a

19、st dep reciati on expen ses on sp ecific Ion g-term assets).accrued expen ses that in curred but not yet p aid or recorded: exa mp les are empio yee salaries and interest on borrowed money. At the end of the accounting period, the accrued expense is recorded through an adjusti ng en try: a debit to

20、an expense acco unt (i.e. Salaries Expen se) and a credit to a liability acco unt (i.e. Salaries P ayable).Accrued reve nues that earned but not yet received or recorded: also called un recorded revenu es. Examp les in clude in terest revenu es, rent revenu es, etc. Such revenues accumulate with the

21、 p ass ing of time, but the firm may have not received the p ayme nt or billed the clie nt. An adjust ing entry should be: a debit to an asset acco unt (i.e. Acco unts Receivable) and a credit to a revenue acco un t (i.e. In terest Revenu e).Unearned reve nues that are reve nues received in cash bef

22、ore delivery of goods/services: exa mp les are magaz ine subscri ptio n fees. customer depo sits for services. These reve nu es are not earned yet and thus should be recorded as liabilities. An adjust ing entry should be: a debit to a liability acco unt (i.e. Unearned Reve nue) and a credit to a rev

23、e nue acco unt (i.e. Reve nu e).Revenue Principle: basis for recording revenues (ie tells when to record revenue and the amoun ts).Match ing Princip le: basis for record ing expen sis (ie directi on to ID all expen ses duri ng the p eriod. measure them. and match them aga inst the reve nues earned i

24、n that p eriod).c. exp lain why the accrual basis of accounting p roduces more useful incomestatements and balance sheets than the cash basis.Revenue is somethi ng earned through the sale of goods or services. Not all cash rece ip tare revenues; for example. cash received through a loan is not reven

25、ue. Expensesare the cost of goods or services used to gen eratereve nu es.Not all cash p ayme nts are expen ses;for exa mple, cash divide nds p aid to stockholders are not expen ses. Net income is the differe nee betwee n reve nues and expen ses.t is rep orted on the in come stateme nt. and is the f

26、ocus in evaluati ng a firms p rofitability.Most companies use the accrual basis accounting recognizing reve nue whe n it is earned (the goods are sold or the services p eformed) and recog nizing expen ses in the p eriod in curred. without regard to the time of rece ipt or p ayme nt of cash. Net in c

27、ome is reve nue earned minus expen ses in curred.Un der the strict cash basis accountingreve nue is recorded only whe n the cash is received and expen ses arerecorded only whe n the cash is p aid. Net in come is cash reve nue minus cash expen ses. The matchi ng princip le is ignored here. result ing

28、 incon formity with gen erally acce pted acco un ti ng princip les.Todays economy is con siderably more lubricated by credit tha n by cash. And the accrual basis. not the cash basis. recog ni zes all asp ects of the credit phenomenon. Inv estors. creditors. and other decision makers seek timely info

29、rmation about an enterprisesfuture cash flows. Accrual basis acco un ti ng pro vides this in formati on by reporting the cash in flows and outflows associated with earnings activities as soon as these cash flows can be estimated with an acce ptable degree of certa in ty. Receivables and p ayables ar

30、eforecasters of future cash in flows and outflows. In other words, accrual basis acco un ti ng aids in p redict ing future cash flows by reporting tran sact ions and other eve nts with cash con seque nces at the time the tran sacti ons and eve nts occur, rather tha n whe n the cash is received and p

31、 aid. Accrual acco un ti ng gen erally pro vides a better in dicati on of p erforma nee tha n cash basis of acco unting since it in creasesthe comp arability of in come stateme nts and bala nee sheets across p eriods.B. Financial Repo rting and Analysisa. define each asset and liability category on

32、the balance sheet and prepare a classified balance sheet.Think of the balance sheetas a p hoto of the bus in ess at a sp ecific point in time. It p rese nts the assets, liabilities, and the equity own ershi p of a bus in ess en tity as of a sp ecific date.Assetsare the econo mic resources con trolle

33、d by the firm.*Liabilitiesp rovided to the firm by the creditors.Liabilities are the financial obligations that the firm must fulfill in the future. are typically fulfilled by payment of cash. They represent the source of financingEquity Ownershi p is the own ers inv estme nts and the total earnings

34、 reta inedfrom the comme nceme nt of the firm. Equity rep rese nts the source of financingpro vided to the firm by the owners.Bala nee sheet acco unts are classified so that similar items are grouped together to arrive at significant subtotals. Furthermore, the material is arranged so that important

35、 relationships are show n.The table below in dicates the gen eral format of bala nee sheet p rese ntati on:Balance Sheet ClassificationsAssetsLiabilities and Own ers EquityCurre nt AssetsCurrent liabilitiesLon g-term inv estme ntsLon g-term debtProp erty, plan and equipmentOwn ers equityIntan gible

36、assetsCap ital stockOther assetsAdditi onal p aid-i n cap italReta ined earningsCurrent Assets:They are cash and other assets exp ected to be conv erted into cash, sold, or con sumed either in one year or in the operating cycle, whichever is longer. Theoperating cycleis the average time betwee n the

37、 acquisiti on of materials and supp lies and the realizati on of cash through sales of the p roduct for which the materials and supp lies were acquired. The cycle op erates from cash through inven tory, p roduct ion, and receivables back to cash. Where there are several op erati ng cycles within one

38、 year, the on e-year p eriod is used. If the op erat ing cycle is more tha n one year, the Ion ger p eriod is used.Curre nt assets are p rese nted in the bala nee sheet in order of liquidity. The five major items found in the curre nt asset secti on are:Cash: valued at its stated value. Cash restric

39、ted for purp ose other tha n p ayme nt ofcurrent obligations or for use in current operations should be excluded from the current asset sect ion.Marketable securities: Also referred to as marketable securities. Valued at costor lower of cost and market.Accounts receivablesam ounts owed to the firm b

40、y its customers for goods andservices delivered. Valued at the estimated amount collectible.Inventories: P roducts that will be sold in the no rmal course of bus in ess.Prep aid exp enses they are expen ditures already made for ben efits (usuallyservices) to be received withi n one year or the op er

41、at ing cycle, whichever is Ion ger. Typ ical exa mples are prep aid rent, advertis ing, taxes, in sura nee p olicy, and office or op erat ing supp lies. They are rep orted at the amount of un-exp ired or uncon sumed cost.Long-Term Investments:Often referred to simply as investments, they are to be h

42、eld for many years, and are not acquired with the inten ti on of dis posing of them in the n ear future.In vestme nts in securities such as bon ds,com mon stock, or Ion g-term no tes thatman ageme nt does not intend to sell with in one year.In vestme nts in tan gible fixed assets not curre ntly used

43、 in op erati ons, such as landheld for sp eculatio n.In vestme nts set aside in sp ecial funds such as a sinking fund, pension fund, orplant expansion fund. The cash surre nder value of life in sura nee is in cluded here.In vestme nts in non-con solidated subsidiaries or affiliated companies.Prop er

44、ty, Plant, and Equip ment:They are prop erties of a durable n ature used in the regular op eratio ns of the bus in ess. With the exce pti on of land, most assets are either dep reciable (such as build ing) or con sumable.Intangible Assets:They lack p hysical substa nee and usually have a high degree

45、 of un certa inty concerning their future ben efits. They in clude p ate nts, cop yrights, fran chises, goodwill, trademarks, trade n ames, secret p rocesses, and orga ni zati on costs. Gen erally, all of these intan gibles are writte n off (amortized) to expense over 5 to 40 years.Other Assets:They

46、 vary widely in p ractice. Exa mp les in elude deferred charges (Ion g-term prep aid expen ses), non-curre nt receivables, intan gible assets, assets in sp ecial fun ds, and adva nces to subsidiaries.Current Liabilities:They are obligati ons that are reas on ably exp ected to be liquidated either th

47、rough the use of curre nt assetsor the creati on of other curre nt liabilities within one year or within the op erat ing cycle, whichever is longer. They are not reported in any consistent order. A typical order is: Notes p ayable, acco unts p ayable, accrued items (e.g. accrued warra nty costs, com

48、pen sati on and ben efits) in come taxes p ayable, curre nt maturities of Ion g-term debt, etc.The excess of total curre nt assets over total curre nt liabilities is referred to as worki ng cap ital. It represents the net amount of a companys relatively liquid resources; that is, it is the liquid bu

49、ffer, or margin of safety, available to meet the finan cial dema nds of the op erati ng cycle.Long-Term LiabilitiesThey are obligati ons that are not reas on ably exp ected to be liquidated within the no rmal op erati ng cycle but, in stead, at some date bey ond that time. Bonds p ayable, no tes p a

50、yable, deferred in come taxes, lease obligati ons, and pension obligatio ns are the most com mon Ion g-term liabilities. Gen erally they are of three typ es:Obligati ons aris ing from sp ecific financing situati ons, such as issua nee of bonds,Ion g-term lease obligati ons, and Ion g-term no tes p a

51、yable.Obligati ons aris ing from the ordi nary op erati ons of the enterp rise such as pensionobligati ons and deferred in come tax liabilities.Obligati ons that are dependent upon the occurre nee or non-occurre nee of one ormore future eve nts to confirm the amount p ayable, or the p ayee, or the d

52、ate p ayable, such as service or p roduct warra nties and other contingen cies.Owners Equity:The compiexity of capital stock agreementsand the various restrictions on residual equity imp osed by state corpo rati on laws, liability agreeme nts, and boards of directors make the own ers equity sect ion

53、 one of the most difficult secti ons to prepare and un dersta nd. The sect ion is usually divided into three p arts:Cap ital stock: the par or stated value of the shares issued.*value.Additional p aid-in capi tai: the excess of amounts p aid in over the par or statedRetained earnings:the corpo rati

54、ons un distributed earnings.b. define each com ponent of a multi-ste p income statement and prepare a multi-ste p income statement.The in come stateme nt measures the success of bus in ess op erations for a give n period of time. A single-ste p income statemengro ups reve nues together and expen ses

55、 together, without further classifying each of the groups. A multi-step income statementmakes further classifications to pro vide additi onal important reve nue and expense data. These classificati ons make the in come stateme nt more in formative and useful. It is recomme nded because:*tran sacti o

56、ns;it recognizes a separation of operating transactions from non-operatingit matches costs and expen ses with related reve nues;*compu tati on of ratios used to assess the p erforma nee of the enterp rise.it highlights certa in in termediate components of in come that are used for theComp onents:Op

57、erating section: a report of the reve nues and expen ses of the companysprincipal op erati ons.o Sales or revenue section: a subsection presenting sales, discounts,allowances, returns, and other related in formati on, and to arrive at the net amount of sales reve nue.o Cost of goods sold section:a s

58、ubsect ion that shows the cost of goods thatwere sold to p roduct the sales.o Selling exp ense: a subsect ion that lists expen ses result ing from theco mpanys efforts to make sales.o Administrative or general expenses: a subsection reporting expenses of general adm ini strati on.Non-op erating section: a report of reve nues and expen ses result ing fromsec on dary or auxiliary activities of the company. In additi on, sp ecial gains and losses that are in freque