Assignment 2: Discussion—Understanding Financial Statements
In this assignment, you will learn to read and interpret financial statements. Understanding the four financial statements provided in the lectures and reading for this week and dealing with a company’s financial performance is critical to making decisions about its management and its relation to the global economy and financial markets.
- Put the following income statement and balance sheet terms (general ledger accounts) in the proper order for properly prepared financial statements:
Taxes, interest, gross profit, selling, general and administrative expenses, sales, depreciation, net income, cost of goods sold, EBITDA.
- Put the following balance sheet terms (general ledger accounts) in the appropriate category as either short-term assets, long-term assets, short-term liabilities, long-term liabilities, and/or owner’s equity for properly prepared financial statements:
- Cash, accounts payable, accruals, property, plant and equipment, inventory, accounts receivables, paid in capital, retained earnings, notes payable, mortgage, accounts payable.
- In terms of McGladrey and Pullen’s Reading & understanding financial statements: A guide to financial reporting, explain the balance sheet equation