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ACCOUNTING AND FINANCIAL STATEMENTS (Ratio Analysis: Analyzing Financial…
ACCOUNTING AND FINANCIAL STATEMENTS
The Nature of Accounting
accounting
is the recording, measurement, and interpretation of financial information
accountants
are the people who prepare accounting information
public accountants
private accountants
Accounting or Bookkeeping?
bookkeeping is more narrow and limited to the routine
bookkeepers require less training than accountants
The uses of Accounting Information
Managers and owners
internal uses
Managerial accounting
cash flow
a budget
external uses
The Accounting Process
Accounting Equation
liabilities
owners' equity
assets
accounting equation
Double-entry bookkeeping
accounting cycle
Examine source documents
Record transactions
Post transactions
Prepare financial statements
Financial statements
the physical results of the accounting process
income statement
expenses
revenue
indicates the firm's profitability
net income
temporary nature of income statement accounts
include profit and loss
Balance sheet
presents a "snapshot" of a company's financial posotion at a given moment
Statement of cash flows
explains howw the company's cash changed grom the beginning of the accounting period to the end.
Ratio Analysis: Analyzing Financial Statements
Ratio analysis
Profitability rations
profit margin
return on assets
return on equity
Asset utilization rations
receivables turnover
inventory turnover
total asset turnover
Liquidity rations
current ratio
quick ratio
Debt utilization ratios
debt to total assets ratio
times interest earned ratio
Per share data
earning per share
dividents per share
Industry analysis