ACCT 110 Lecture Notes - Lecture 1: Santa Barbara City College, Historical Cost, Capital Structure
Document Summary
The sfp can be used to assess creditworthiness. A statement of financial position provides information about: Liquidity and solvency (to assess risk of investment) Details about the company"s financial structure (to assess financial flexibility) Net income significantly higher than cash flows from operations. Issuance of shares to offset negative cash flows. A statement of cash flows can be used to assess earnings quality. Statement of financial position (sfp) also known as the balance sheet under aspe. It is also useful for assessing a company"s: For computing rates of return on invested assets. Liquidity (time until asset is realized or liability has to be paid) Solvency (ability to pay debts and related interest) Financial flexibility (ability to respond to unexpected needs and opportunities) Similar items are classified (grouped together), with sub-totals. Reported separately, and in sufficient detail in order to: Allow users to assess amounts, timing, and uncertainty of future cash flows.
