ACCT-UB 1 Study Guide - Final Guide: Gross Profit, Loan Covenant, Walmart
3 Mar 2014
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Financial accounting: identifying, measuring, recording, and communicating economic events in value terms in order to provide information for decision-making purposes to stakeholders outside the firm, primarily through financial statements. Owners (investors, stockholders, shareholders) want capital gains and dividends: their returns grow with the company but they can also fall. Creditors want interest over a length of time: returns are fixed but (risk of default) < (risk of equity) All corporations must file financial reports, whereas proprietorships (one owner) and partnerships do not because the owners better understand how the business is doing: monitoring (agency theory) Owners hire agents (managers) with skill to run firm. Without monitoring (financial reports) and incentives (executive compensation), agents will not act in best interests of owners. 10-q quarterly, 10-k annually; sec enforces compliance and finds fraud: contracting, valuation. Revenues and expenses during the report period. How well did the company perform during the period: cash flow statement. Change in cash during the report period.
