FIRE 311 Study Guide - Midterm Guide: Life Insurance, Dupont Analysis, Income Statement
2 May 2016
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Chapter 2: names and functions of 4 main financial statements: Balance sheet: represents a picture taken on a specific date that shows a firm"s assets (investments) and how those assets are financed (debt or equity). Income statement: presents the results of business operations during a specified period of time. Summarizes the revenues generated and the expenses incurred. Stmt of cash flows: designed to show how the firm"s operations have affected its cash position examines investment decisions (uses of cash). Stmt of retained earnings: changes in the common equity accounts between balance sheet dates: liquidity ratios: is the firm able to meet its current obligations. Provides the best single indicator of the extent to which the claims of short term creditors are covered by assets that are expected to be converted to cash quickly. Trend analysis provides info about whether the firms financial position is more likely to improve or to deteriorate in the future.
