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Financial Statement Analysis Fourth Lecture

Financial Statement Analysis Fourth Lecture

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Published by: David Obuobi Offei Kwadwo on Mar 30, 2012
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3/30/12
 
FINANCIAL REPORTINGMECHANICS
 The financial statements of a company areend products of a process for recordingtransactionsof the company related to operations,financing, and investment. The structures of financial statements themselves reflect thesystem of recording and organizingtransactions. To be an informed user of financial statements, the analyst must beknowledgeable about the principles of thissystem.
Classification of Business Activities forFinancial Reporting:
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OPERATING ACTIVITIES AND INVESTINGACTIVITIESOperating activities
are those activitiesthat are part of the day - to - day businessfunctioning of an entity. Examples includethe sale of meals by a restaurant, the sale of services by a consulting firm, themanufacture and sale of ovens by an oven-manufacturing company, and takingdeposits and making loans by a bank.
Investing activities
are those activitiesassociated with acquisition and disposal of long-term assets. Examples include thepurchase of equipment or sale of surplusequipment (such as an oven) by arestaurant and the urchase or sale of an
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FINANCING ACTIVITIESFinancing activities
are thoseactivities related to obtaining orrepaying capital. The twoprimary sources for such funds areowners (shareholders) or creditors.Examples includeissuing common shares, taking out abank loan, and issuing bonds.
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