Financial Accounting; Understanding Financial Statements (Required)
You may want to start with this on-line tutorial. It will take a total of 45 minutes and can be completed over multiple days. It is optional and not graded. It explains accrual accounting and financial statements is an easy to understand way. To open click and open in a new window or copy the link into the url section of your browser.
Our purpose this week: learning how to understand and interpret financial statements. Show us that you have read and understood the required readings, links and attached files - quote them where appropriate.
The class should discuss all of the questions listed below as they relate to the financial statements of any U.S. public company of your choice in its latest annual report. You can find the financial statements of any U.S. public company by visiting Morningstar, Yahoo Finance or MSN Money, and using the stock market symbol for your chosen company (which can be looked up on Morningstar, Yahoo Finance or MSN Money). If you work for a U.S. public company, you probably want to use the financial statements of your company - but the choice is up to you.
NOTE: Sometimes Yahoo, MSN Money and Morningstar omit numbers. Only the annual report from the company web site or the SEC form 10-K (for U S Companies) can be guaranteed to have all numbers correct. The 10-K Business section and Management Discussion and Analysis contain valuable information about the business, competitors and what happened to financial results. It can be found on the SEC web site: www.sec.gov. Click on Edgar and then enter the ticker symbol for the company. Search for 10-K.
It is useful to compare financial ratios for a company with financial ratios of its industry. Industry financial ratios can be found on Morningstar.com, Yahoo Finance and MSN Money.
Please answer the following questions:
1) What 3 items of important information does the income statement reveal about the financial performance of the company over the last three years?
2) What 3 items of important information does the balance sheet reveal about the financial position of the company over the last two years?
3) Can you identify the major sources of funding used by the company from the information presented in the company's Cash Flow Statement?
If not, how could you get this information?
4) Who is responsible for: a) the issuance, and b) the content of the company financial statements?
5) What assurance, if any, is there that the financial statements are in compliance with GAAP, and are free of material misstatements?
6) Of what use, if any, are the notes to the financial statements? Give 2 facts learned from reading footnotes.
7) What can you learn from Business Section of the 10-K? Give two facts about the company that you picked from the Business Section.
8) What Can you learn from the Management's Discussion and Analysis of Financial Condition and Results of Operations in the 10-K? Give two facts about the company from this section.
A separate main topic has been created in the Week 2 discussion for each question.
Each student is expected to make a significant contribution to the overall discussion. Please post your answers under the appropriate main topic headings. If you can add a substantive comment to a classmate's post, please do so. Otherwise read all posts.
Quantitative analysis tied to the financial statement concepts will add value to your work.
The Power Point (Financial Statements.ppt) should be very helpful.
Week 2 - Financial Accounting
In Week 1 we discussed economics and management decisions. We focused on how choices could be analyzed and decisions made. Now we turn to evaluating the success of those choices and decisions, which is the scorecard known as Financial Reporting.
For those of you who would like more background on financial reporting, some files are attached.
A Power Point presentation that clearly explains financial statements, and shows you what to look for in them (Financial Statements.ppt)
A Word file showing financial statements as diagrams (FinancialStatementDiagrams.doc)
A file that describes some key features of financial statements (Week2.xls)
A Word file describing the main SEC filings (Guide to SEC Filings.doc) IMPORTANT
With all of this information, where does one begin?
Start with the Power Point presentation (Financial Statements.ppt)
Next view the Word file (FinancialStatementDiagrams.doc)
Then read the attached Excel file (Week2.xls) Week2.xls
Next go to http://www.baruch.cuny.edu/tutorials/statements/
It is strongly recommended that you use the file provided in the section of this discussion titled "A Sample Answer To Our Assignment."
If you wish to know more about financial statements visit these helpful web-sites:
If you wish to find financial statements on the internet, bear in mind that financial statements for public companies can be found in their required reports to the U.S. Securities and Exchange Commission (SEC), which are Form 10-K (annual) and Form 10-Q (quarterly). You can find the financial statements of all public companies in the U.S. and their Forms 10-K and 10-Q in Morningstar, MSN Money and Yahoo Finance.
Finally, the U.S. is planning to switch its financial reporting standards from Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS) by the year 2015. GAAP is a very detailed rules-based system, whereas IFRS is a very summarized, non-detailed, principles-based approach. For more visit this link:http://www.ifrs.com/video.html
A separate main topic has been created for each question. Please post your answers under the appropriate main topic headings for each question. Each student is expected to make a significant contribution to the overall discussion.
|Due By (Pacific Time)||10/18/2015 12:00 pm|
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