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04-09-2018

Product code: Accounts-AW668

 

Answer the following questions completely.  Provide specific examples to support your answers. 

 

  1. In financial statement analysis, investors are aware of the Manifestations of BIAS and Uncertainty when analysts and managers prepare their reports.  Discuss what you think is meant by BIAS and Uncertainty in the reporting process.   Indicate both the positive and negative implications of those issues for the financial statement analysis process.  You can use references to actual companies M D & A to enhance your explanations.
  2. There are 4 financial statements available for the financial analysts to use in determining the value of a company’s stock.  Discuss completely which REFORMULATED financial statement you believe provides the most accurate indication of value for an investor? 
  3. Accrual based accounting is a requirement of Generally Accepted Accounting Principles (GAAP).  The use of both the Matching Principles and Revenue Recognition Principles has both benefitted and undermined the reliability of the reporting process.  Discuss the implications of accrual based accounting in the financial statement analysis process.  Provide specific indicators of problems which might lead an analyst to discover a potential misstatement or misrepresentation in the financial statements. {Primary focus should be on revenue and capitalization of expenses.}
  4. Dividends provide investors with a return on investment and are incorporated into the valuation process by many analysts.  Discuss both the advantages and disadvantages of including future dividend payouts, especially pertaining to GROWTH companies, when attempting to value a company’s stock (DIVIDEND CONUNDRUM ISSUE).  How accurate is a potential future dividend in determining a current stock price? 

 

  1. Cash, from the valuation perspective, is viewed as a non-productive asset.  Discuss the most effective methodology employed by a corporation to dispose of the excess cash in an attempt to fulfill the Cash Conservation Equation (source = use.)  Incorporate the Free Cash Flow concepts in support of your answer.  

 

 

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The main aim of financial report is to form a basis for the Conceptual Framework along with many other features of the Framework emerging from it and to give financial information related to the entities of reporting which are valuable to the current and potential lenders, investors and some other creditors which help them in making decision of supplying resources to the entity.

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