Chapter 15: Using Accounting Information

1. Chapter 15: Using Accounting Information

2. Learning Objectives • Explain why accurate accounting information and audited financial statements are important. • Identify the people who use accounting information and possible careers in the accounting industry. • Discuss the accounting process. • Read and interpret a balance sheet. • Read and interpret an income statement. • Describe business activities that affect a firm’s cash flow. • Summarize how managers evaluate the financial health of a business.

3. Why Accounting Information Is Important • Recent Accounting Scandals • Why Audited Financial Statements Are Important • Reform: The Sarbanes-Oxley Act of 2002

4. Who Uses Accounting Information • The People Who Use Accounting Information • Different Types of Accounting • Careers in Accounting

5. The Accounting Process • The Accounting Cycle • Step 1: Analyzing Source Documents • Step 2: Recording and Posting Transactions • Step 3: Preparing Financial Statements • The Accounting Equation

6. The Balance Sheet • Assets • Current Assets • Fixed Assets • Intangible Assets • Liabilities and Owners’ Equity • Current Liabilities • Long-Term Liabilities • Owners’ or Stockholders’ Equity

7. The Income Statement • Revenues • Cost of Goods Sold • Operating Expenses • Net Income The Statement of Cash Flows

8. Evaluating Financial Statements • Using Accounting Information to Evaluate a Potential Investment • Comparing Data with Other Firms’ Data • Profitability Ratios • Short-Term Financial Ratios • Activity Ratios • Debt-to-Owners’-Equity Ratio • Northeast’s Financial Ratios: A Summary