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What does the collected data reveal about the performance and position of the company?
Evaluating financial performance and position is a business activity that is important for both business owners as well as for anyone who is thinking about buying or otherwise investing in a company. [ The idea is to make sure the business is financially stable, is well placed within its market, and has an acceptable level of growth opportunity for the future. In order to determine if this set
of circumstances exists, it is important to look closely at where the company has been, where it is now, and where it is likely to move in the future. Begin your financial performance and position evaluation by collecting all the background information on the subject company that you can find. You want to understand what opportunities and challenges the company has faced in the past, and how the business was able to make the most of those opportunities and build a loyal clientele even in the face of some setbacks and challenges. By knowing how the company arrived at its present position in the marketplace, it is easier to get an idea of how it performs in various economic climates and thus have some clues as to how the company would fare in the future. Once you have a good idea of how the business came together and managed in the past, focus your attention on what is happening in the here and now. With this part of your financial performance and position evaluation, the idea is to compare how the company is doing today with what you know of the past performance. Look closely at current sales figures and market share, and determine if the company is holding its own, losing some ground, or continuing to expand that revenue stream and increase its market share. Also look closely at the current cash reserves, real estate, and other assets held by the business in comparison to any outstanding indebtedness. Consider shifts in the economy that are occurring now which could be driving sales up or down. Essentially, a company that is able to hold its own during tough economic times is likely to be very stable and worth looking into further. ]
Expert answered|dvalencia1|Points 60|
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Asked 9/4/2013 10:34:50 AM
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why does the financial accounting standards board allow both direct and indirect cash flows?
Weegy: The Financial Accounting Standards Board's Summary of Statement No. 95 requires a company to report a statement of cash flows as part of its full set of financial statements. [ Net cash flow from operating activities shows the amount of cash a company generates through its normal course of business. Accounting rules allow companies to report their cash flow statement using the direct or indirect method, and both methods report net cash flow from operating activities. In the United States in 1971, the Financial Accounting Standards Board (FASB) defined rules that made it mandatory under Generally Accepted Accounting Principles (US GAAP) to report sources and uses of funds, but the definition of "funds" was not clear. Net working capital might be cash or might be the difference between current assets and current liabilities. From the late 1970 to the mid-1980s, the FASB discussed the usefulness of predicting future cash flows.[7] In 1987, FASB Statement No. 95 (FAS 95) mandated that firms provide cash flow statements.[8] In 1992, the International Accounting Standards Board issued International Accounting Standard 7 (IAS 7), Cash Flow Statement, which became effective in 1994, mandating that firms provide cash flow statements.[9] US GAAP and IAS 7 rules for cash flow statements are similar, but some of the differences are: IAS 7 requires that the cash flow statement include changes in both cash and cash equivalents. US GAAP permits using cash alone or cash and cash equivalents.[5] IAS 7 permits bank borrowings (overdraft) in certain countries to be included in cash equivalents rather than being considered a part of financing activities.[10] IAS 7 allows interest paid to be included in operating activities or financing activities. US GAAP requires that interest paid be included in operating activities.[11] US GAAP (FAS 95) requires that when the direct method is used to present the operating activities of the cash flow statement, a supplemental schedule must ... (More)
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Asked 8/28/2013 12:33:47 PM
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Identify situations that might lead to unethical practices and behavior in accounting. Do you think the Sarbanes-Oxley Act has made a difference in the ethical behavior of companies regarding their financial accounting? Why or why not?
Weegy: Situationshat might lead to unethical practices and behavior in accounting: Misleading financial analysis in order to obtain personal gains Misuse of funds. Purposely providing erroneous information in regards to expenses. Exaggerating the value [ of corporate assets Purposely providing erroneous information in regards to liabilities Securities fraud Bribery Manipulation of financial markets Inside trading The Sarbanes-Oxley Act (SOX) was established in 2002 to help ease the worries of the public after a wide rash of unethical and fraudulent scandals occurred. This act requires that all publically traded US corporations have a strict set of internal controls in place to assure that all businesses have controlled environments, risk assessments, control activities, information and communication, and monitoring in order to keep unethical acts under control. The Sarbanes-Oxley act also brought forth the Public Company Accounting Oversight Board (PCAOB) that oversees and audits the standards and regulates the auditor activities. ] (More)
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Asked 9/3/2013 3:03:04 PM
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What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?
Weegy: Liquidity is the ability of a business to pay its current liabilities using its current assets. Information about liquidity of a company is relevant to its creditors, employees, banks, etc. [ current ratio, quick ratio, cash ratio and cash conversion cycle are key measures of liquidity. Profitability is the ability of a business to earn profit for its owners. While liquidity ratios and solvency ratios are relationships that explain the financial position of a business profitability ratios are relationships that explain the financial performance of a business. Key profitability ratios include net profit margin, gross profit margin, operating profit margin, return on assets, return on capital, return on equity, etc. Solvency is a measure of the long-term financial viability of a business which means its ability to pay off its long-term obligations such as bank loans, bonds payable, etc.. Information about solvency is critical for banks, employees, owners, bond holders, institutional investors, government, etc.. Key solvency ratios are debt to equity ratio, debt to capital ratio, debt to assets ratio, times interest earned ratio, fixed charge coverage ratio, etc. ] (More)
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Asked 9/3/2013 3:29:43 PM
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