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KatRina [158]
3 years ago
14

Accountants focus on creating financial statements, whereas finance professionals use these statements to evaluate a firm and an

swer questions about its performance. Indicate which financial statement you would refer to when answering the questions in the following table:
Income Statement Statement of Retained Earnings

How profitable has the firm been?
How much of the firm's earnings are left as balance after the firm pays out dividends to its shareholders?

If compensation for senior management is based on short-term performance of the firm, in the short run the firm is likely to:
a. Overstate its earnings
b. Understate its earnings
Business
1 answer:
11111nata11111 [884]3 years ago
4 0

Answer:

1. Indication of financial statement to refer to when answering questions in the following table:

Question                                                   Financial Statement

How profitable has the firm been?         Income Statement

How much of the firm's earnings are     Statement of Retained Earnings

left as balance after the firm pays out

dividends to its shareholders?

2. If compensation for senior management is based on short-term performance of the firm, in the short run the firm is likely to:

a. Overstate its earnings

Explanation:

Company A's Income Statement shows its profit performance at different levels.  At one level is the gross profit, which shows the difference between the net sales or service revenue and the cost of sales/service.  At another level is the operating income, which is the income before interest and taxes.  The next important level is the net income, which is the profit after taxes.  This shows the earnings available for distribution to stockholders.  The Statement of Cash Flows classifies the cash flows generated into operating, investing, and financing activities, and shows the non-cash flow adjustments.

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The situation where the quantity supplied of a good is greater than the quantity demanded at
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5 0
3 years ago
Suppose you buy 100 shares of stock initially selling for $50, borrowing 25% of the necessary funds from your broker; that is, t
lana [24]

Answer:

money invest is $3750

amount of loan owned to broker = $1350

when selling price is $40 rate of return = - 29.33%

when selling price is $50  rate of return = - 2.67%

when selling price is $60  rate of return = 24%

Explanation:

given data

No of share = 100

initial selling = $50

borrow = 25%

initial margin purchase = 25%

interest rate = 8%

to find out

How much money invest and How much borrow from broker and rate of return at end of 1 year at (i) $40, (ii) $50, (iii) $60

solution

we know total investment is here

total investment = No of share × initial selling per share

total investment = 100 × 50

total investment = $5000

so

borrow fund is = 0.25 × 5000 = $1250

and Equity invest = total investment - borrow fund

equity invest = 5000 - 1250 = $3750

and

amount of loan own to broker at the end of year is

amount of loan = borrow fund × ( 1 + rate )

amount of loan = 1250 ( 1 + 0.08)

amount of loan owned to broker = $1350

and

selling price here after 1 year is $40

so rate of return is = \frac{(no of share * selling price) -loan amount - equity invested}{equity invested}     ........................1

rate of return is = \frac{(100 * 40) - 1350 - 3750}{3750}

rate of return = - 29.33%

and

selling price here after 1 year is $50

put here value

rate of return is = \frac{(100 * 50) - 1350 - 3750}{3750}

rate of return = - 2.67%

and

selling price here after 1 year is $60 so from equation 1

put the value

rate of return is = \frac{(100 * 60) - 1350 - 3750}{3750}

rate of return = 24%

7 0
3 years ago
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