Reflection

In my accounting class, I have learned to compute profit or loss, get the amount of total assets, liabilities
and equity, and prepare basic financial statements. However, I have looked at the amounts that I was
computing as merely figures. But upon doing this activity, I acquired a deeper understanding and
appreciation of financial statements.

I finally understood why some say that financial statements tell the story of a business. The financial
statements are summarized diaries which show what happened in the past. But these are not just
records of mere empty experiences. Financial statements are records of how well the entity has
performed and offers a glimpse of how the entity has been managed and has been affected by certain
events during a certain period. This activity has further opened my eyes to the importance of the
financial statements and the difficulty in gathering data to be used in completing the financial reports.

I have also learned that Financial Ratios can help accountants and users of FS to further analyze
information provided in the financial statements. Upon glancing at the Financial Statements, a user can
see the various elements – assets, liabilities, equity, revenues, and expenses. But upon using financial
ratios, the user of the Financial Statements can determine how often a company pays their short-term
obligations (accounts payable ratio) and how long before they pay their obligations (average age of
payables), how long it takes for entities to sell their inventory (average age of inventories), how often
they can sell their inventory (inventory turnover), how efficient an entity can utilize their resources (total
asset turnover and fixed asset turnover), how liquid an entity is (current ratio and quick ratio), and many
more.

In this activity, I also learned how government rulings and court decisions can adversely affect an
entity’s operations. ABS-CBN has faced the wrath of the government and the Duterte administration and
it shows in the 2019 financial statements and financial ratios of the company that they have clearly
struggled.

Overall, this activity has been an eye-opener for me. It opened my eyes to all the information that could
be found in an entity’s financial statements and the importance of computing financial ratios and using
them to analyze further the status of a business. As a future accountant, entrepreneur and
businessman, being equipped with knowledge about financial statements and financial ratios is vital
towards success.