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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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Answer:

Part (a) Should the firm buy the new equipment

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Part (b) should the company buy the new equipment and increase the selling price?

The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.

Explanation:

Part (a) Should the firm buy the new equipment

                                                 Do Not Buy      Buy New Equipment

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Less Variable Cost                       15,000                      30,000

Contribution                                  15,000                      20,000

Less Fixed Costs                          14,000                      20,000

Net Income                                     1,000                           0

The Firm Should not Buy the New Equipment since there is  No Profit ( instead $1000 Profit lost) from this decision and is in a worse off position than before.

Part (b) should the company buy the new equipment and increase the selling price?

                                                 Do Not Buy      Buy New Equipment

                                                        $                                $

Sales                                             30,000                     49,500

Less Variable Cost                       15,000                      27,000

Contribution                                  15,000                     22,500

Less Fixed Costs                          14,000                      20,000

Net Income                                     1,000                        2,500

The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.

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Whst is the basic purpose of any communication? A. To make a point B.To provide information C. To establish a story D. To convey
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Answer:

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Answer:

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Explanation:

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Answer:

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Explanation:

The Journal entry is shown below:-

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Answer:

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