01 ELMS ACTIVITY 1

1. Respond to shayne’s criticism that shareholders’ equity does not represent the market value of
the company. What information does the statement of financial position provide?
 The balance sheet has been criticized due to significant limitations. These limitations
include the fact that, although there are exceptions, the balance sheet generally does
not employ market values in measuring economic resources and obligations. Therefore,
I agree with the criticism given by Shayne.

2. The usefulness of the balance sheet is enhanced by classifying assets and liabilities according to
common characteristics. What are the classifications used in Under Armour’s statement of
financial position, and what do those categories include?
 In the asset sections of the financial position given, the accounts are listed in the
descending order of their liquidity or how quickly and easily they can be converted to
cash. Similarly, liabilities are listed in the order of their priority for payment. In financial
reporting, the terms current and non-current are synonymous with the terms short-
term and long-term respectively, so they are used interchangeably.
 Each of the three segments on the balance sheet will have many accounts within it that
document the value of each. Accounts such as cash, inventory, and property are on the
asset side of the balance sheet, while on the liability side there are accounts such as
accounts payable or long-term debt. The exact accounts on a balance sheet will differ by
company and by industry.