Question 1

Today corporations are required to send their stockholders an annual report.Assume that you are a prospective investor trying to decide if you should invest in a specific corporation.What type of information is contained in an annual report that would help you decide if this is the right investment for you?

Accepted Answer

An annual report typically contains a variety of information that can help prospective investors make informed decisions about whether to invest in a specific corporation. Some of the key types of information that may be included in an annual report include:

1. Financial Statements: This includes the corporation's balance sheet, income statement, and cash flow statement, which provide a comprehensive overview of the company's financial health and performance.

2. Management Discussion and Analysis (MD&A): This section provides insights from the company's management team about the company's performance, challenges, and future outlook.

3. Business Operations: Annual reports often include a detailed overview of the company's business operations, including its products or services, market position, and competitive landscape.

4. Corporate Governance: This section may include information about the company's board of directors, executive compensation, and corporate governance practices.

5. Risk Factors: Annual reports typically disclose potential risks and uncertainties that could impact the company's future performance and financial results.

6. Corporate Social Responsibility (CSR) and Sustainability: Many companies include information about their CSR initiatives, environmental impact, and sustainability efforts in their annual reports.

7. Auditor's Report: This section includes the independent auditor's opinion on the company's financial statements and internal controls.

By reviewing these sections of the annual report, prospective investors can gain valuable insights into the company's financial performance, management's perspective on the business, potential risks, and overall corporate governance practices. This information can help investors make an informed decision about whether the company is the right investment for them.

Question 2

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
-Refer to Ridgley, Cooper, and Ross.Which of the following represents a key component of the Sarbanes-Oxley Act relating to consulting services?

Accepted Answer

The key component of the Sarbanes-Oxley Act relating to consulting services is that accounting firms are prohibited from providing many types of nonaudit consulting services to the companies they audit. This is to avoid any potential conflicts of interest and ensure that the auditing process is independent and objective. Choice A is incorrect because there is no requirement for a public corporation to change its lead consulting firm every five years. Choice C is incorrect because there is no ban on accounting firms who report violations from consulting. Choice D is incorrect because the SEC is required to establish a full-time five-member federal oversight board that will police the accounting industry, not specifically the consulting industry. Choice E is incorrect because consultants are not required to maintain financial documents and audit work papers for fifteen years.

Question 3

What is a profitability ratio? What is a short-term financial ratio? Why are these ratios important?

Accepted Answer

A profitability ratio is a financial metric used to evaluate a company's ability to generate profit in relation to its revenue, assets, or equity. Common profitability ratios include gross profit margin, net profit margin, return on assets, and return on equity. These ratios provide insight into how efficiently a company is using its resources to generate profit and can be used to compare the performance of different companies within the same industry.

On the other hand, a short-term financial ratio is a metric used to assess a company's short-term financial health and liquidity. These ratios include the current ratio, quick ratio, and working capital ratio, which measure a company's ability to meet its short-term obligations and manage its current assets and liabilities effectively.

Both profitability ratios and short-term financial ratios are important because they provide valuable information about a company's financial performance and stability. Profitability ratios help investors and stakeholders understand how well a company is performing in terms of generating profit, while short-term financial ratios provide insight into a company's ability to meet its short-term financial obligations and manage its working capital. By analyzing these ratios, investors, creditors, and management can make informed decisions about the company's financial health and future prospects.

Question 4

What are the differences between managerial accounting and financial accounting? From a career standpoint, which type do you prefer and why?

Accepted Answer

The answer of What are the differences between managerial accounting...

Question 5

Define a balance sheet (also called a statement of financial position).

Accepted Answer

The answer of Define a balance sheet (also called a...

Question 6

Why would managers, lenders, and investors compare current financial statements with those prepared for past accounting periods?

Accepted Answer

The answer of Why would managers, lenders, and investors compare...

Question 7

What is the accounts receivable turnover? What is an inventory turnover? Why are these important ratios for a manager to track?

Accepted Answer

The answer of What is the accounts receivable turnover? What...

Question 8

The primary users of accounting information are managers.What other groups outside the organization may use accounting information about a firm?

Accepted Answer

The answer of The primary users of accounting information are...

Question 9

What does it mean to post a transaction? Would this part of the accounting cycle be done before or after preparing a trial balance?

Accepted Answer

The answer of What does it mean to post a...

Question 10

Describe the employment trends for accountants, auditors, and managers in the accounting profession between now and the year 2016.Then describe what skills employees must have in order to be successful in the accounting profession.

Accepted Answer

The answer of Describe the employment trends for accountants, auditors,...

Question 11

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
-Refer to Ridgley, Cooper, and Ross.What does GAAP stand for?

Accepted Answer

GAAP stands for generally accepted accounting principles.

Question 12

How would it be easier to determine if a firm made or lost money last year-by looking at the balance sheet or by looking at the income statement? Support your answer by explaining in general terms what accounts a balance sheet lists and what accounts an income statement lists.

Accepted Answer

The answer of How would it be easier to determine...

Question 13

What type of information is reported on a corporation's statement of cash flows?

Accepted Answer

The answer of What type of information is reported on...

Question 14

In what ways does the Sarbanes-Oxley Act improve the validity of the information provided by a firm's accounting system?

Accepted Answer

The answer of In what ways does the Sarbanes-Oxley Act...

Question 15

Why are current assets listed before fixed assets on the balance sheet?

Accepted Answer

The answer of Why are current assets listed before fixed...

Question 16

What types of accounts might be listed on a firm's income statement? What would be the term for the dollar amount left at the bottom of the income statement?

Accepted Answer

The answer of What types of accounts might be listed...

Question 17

Managers and other groups interested in a business firm's financial records must be able to "trust the numbers." Unfortunately, a large number of accounting scandals have caused people to doubt the numbers.Why do you think corporate executives "cook" their company's books?

Accepted Answer

The answer of Managers and other groups interested in a...

Question 18

Write the accounting equation.Then define each term and give an example.

Accepted Answer

The answer of Write the accounting equation.Then define each term...

Question 19

Explain why a firm's financial statements should be audited.

Accepted Answer

The answer of Explain why a firm's financial statements should...

Question 20

List the five steps in a typical accounting cycle.Then explain why each step is important.

Accepted Answer

The answer of List the five steps in a typical...

Quiz 15: Using Accounting Information