COMM 217 Lecture Notes - Lecture 3: Canadian Tire, Accrual, Financial Statement
25 Sep 2017
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Chapter 3: operating decisions and the statement of earnings. The focus of the chapter is on the preparation and analysis of the classified statement of earnings (hereafter, s/e). Companies try to generate profits over the operating cycle. It is not possible to sustain itself by generating cash from borrowings and/or peripheral activities. Peripheral activities are any activities that fall outside of a company"s primary scope of business. The length of the operating cycle varies from company to company. An auto dealer"s operating cycle, for instance, is longer than 7-eleven"s operating cycle. It takes a longer period of time for people to finance a new car purchase than to collect enough loose change to purchase a chocolate bar. A company should strive to shorten its operating cycle to reduce risk exposure and bolster growth. The figure2 depicted below is canadian tire"s consolidated s/e. 3 public companies, like canadian tire, regularly publish earnings data and this practice is consistent with the periodicity assumption.
