Assignment: Discussion—Understanding Financial Statements

Course Introduction

Welcome to the course Financial Practices for Managers!

Managerial finance deals with decisions made in a firm that are associated with revenue and profits. Many of these decisions are concerned with financing (also termed cash inflows) and investing (also termed cash outflows). The overall focus is maximizing shareholder wealth. To do this, a manager needs to focus on a variety of factors including financial and nonfinancial considerations.

Management faces various challenges to make decisions such as the following:

• Purchasing new equipment
• Establishing a selling price of a product
• Eliminating a division

The outcomes of these decisions can have long-term effects on a company. In some instances, wrong decisions could be devastating for the company, leading to bankruptcy. Management should have a good understanding of the techniques involved in the decision-making process to make appropriate financial and nonfinancial decisions.

In this course, you will explore various concepts and techniques used in the decision-making process. The readings, assignments, and lectures in each module provide a glimpse of various financial tools that organizations use to capture and evaluate complex costs associated with business actions. You will also review how management within an organization uses internally- and externally-reported information to make important operating decisions.

Module Overview

Analysis and Interpretation of Financial Statements

The ability to make effective and efficient decisions—in the area of human resources, operations, or finance—is one of the fundamental skills of an efficient manager. Managers use a variety of tools to make decisions. In the initial steps of making effective decisions, managers identify the company's individual performance and industry performance by seeking answers to specific questions.

Questions to analyze a company's individual performance are as follows:

• What is the bottom line?
• Are revenues exceeding expenses?
• Is there sufficient cash flow or working capital to achieve short- and long-term objectives?
• Are resources being used efficiently?

Questions to analyze the company's industry performance are as follows:

• What is the company's market share?
• Are the industry standards being met?
• Is the company one of the best in the industry?

A financial-statement analysis can answer most of these questions. In this module, you will discuss the use of financial statements in the decision-making process. You will also discuss the techniques applicable to this analysis.

Module Readings

Complete the following readings early in the module:

• Module overview
• From your course textbook, The portable MBA in finance and accounting, 4th , read the following chapters:
  • Understanding Financial Statements
  • Analyzing Financial Statements
  • Analyzing Business Earnings
• From the Internet, read:
  
  • McGladrey & Pullen, LLP. (2010). Reading & understanding financial statements: A guide to financial reporting.
  • Elevator Pitch

In this assignment, you will learn to read and interpret financial statements. Understanding the four financial statements provided in the lectures and reading for this week and dealing with a company’s financial performance is critical to making decisions about its management and its relation to the global economy and financial markets. 

 Tasks:

• Put the following income statement and balance sheet terms (general ledger accounts) in the proper order for properly prepared financial statements:
  Taxes, interest, gross profit, selling, general and administrative expenses, sales, depreciation, net income, cost of goods sold, EBITDA.
• Put the following balance sheet terms (general ledger accounts) in the appropriate category as either short-term assets, long-term assets, short-term liabilities, long-term liabilities, and/or owner's equity for properly prepared financial statements:
• Cash, accounts payable, accruals, property, plant and equipment, inventory, accounts receivables, paid in capital, retained earnings, notes payable, mortgage, accounts payable.
• In terms of McGladrey and Pullen’s Reading & understanding financial statements: A guide to financial reporting, explain the balance sheet equation in 300 words or less. Incorporate this explanation into your complete initial post.

 Submission Details:

• By Friday November 16,2018, post your responses to this Discussion Area. Support your assumptions by citing reputable source material used for this discussion in APA format. While responding, share any real-world experiences involving what these concepts mean to you as far as their role in decision making is concerned. Provide substantive comments by contributing new, relevant information or quotes from course readings, Web sites, or other sources; building on the remarks or questions; or sharing practical examples of key concepts from your experiences—professional or personal.

Write your initial response in 300–500 words.  Write your initial response in 300–500 words. Your response should be thorough and address all components of the discussion questions in detail, include citations of all sources, where needed, according to the APA Style, and demonstrate accurate spelling, grammar, and punctuation.  turned-in on time, Grading criteria followed All assignment qualifications addressed correctly, Grading Criteria followed, Include Question followed by the answer  Reference Page Included Cover page Included, Paragraphs  Indented,  Running-head included, main heading should be centered; all  new  paragraphs should be indented;  paper should be right ragged,   not right justified; references,  should always go on a standalone  page. abstracts are not usually indented; acronyms should be spelled out when using them  for  the first time, for example HR. references as listed are APA  standard.   When you  submit your papers through turnitin.com, your overall  similarity  index  score should not be exceedingly high, with   ten to  fifteen percent  being  the maximum,  Please make sure your APA  formatting of citations. I have provided the  APA resource cite for you. https://owl.english.purdue.edu/owl/resource/560/01, Please work on using literature within the span of the last 5 years,  keep in mind there should not be any one, two, or three sentence  paragraphs   Your response should be thorough and address all components of the discussion question in detail, include citations of all sources, where needed, according to the APA Style, and demonstrate accurate spelling, grammar, and punctuation.  

Do the following when responding:

Read your answers .

Provide substantive comments

• contributing new, relevant information from course readings, Web sites, or other sources;
• building on the remarks or questions; or
• sharing practical examples of key concepts from your professional or personal experiences
• Respond to feedback on your posting and provide feedback to their ideas.
• Make sure your writing
  • is clear, concise, and organized;
  • demonstrates ethical scholarship in accurate representation and attribution of sources; and
  • displays accurate spelling, grammar, and punctuation.

 Grading Criteria:

Quality of initial posting, including fulfillment of assignment instructions

Reference to supporting readings and other materials

Language and grammar