Wednesday, September 7, 2011

Chapter 1 , P1-2A (Page 34)

This one was hard for me. I might have to redo this vlog if I get any of them wrong. I'm going on about 4 hours of sleep today... Long day ugh.


P1-2A
(a) With this one I'll say statement of cash flow because it shows the amount of cash provided or used by operating activities, investing activities, and financing activities.
(b) I'd say the income statement for this one because it tells about past performance and thus gives an indication of future performance.
(c) And for this one I'm going with balance sheet. Creditors analyze a company's balance sheet to determine the likelihood that they will be repaid (page14). They carefully evaluate the nature of the company's assets and liabilities.
(d) And for the last one I'm going with statement of cash flow. I say this because it shows the amount of cash provided or used by operating activities, investing activities, and financing activities.

Chapter 1 , P1-A (Page 34)

(P1-1A

(a) The concern over legal liability would make the corporate form a better choice over a partnership. Also, the corporate form will allow the busi­ness to raise cash more easily, which may be of importance in a rapidly growing industry.
 P1-2A
(a) In deciding whether to extend credit for 30 days The North Face, Inc. would be most interested in the balance sheet because the balance sheet shows the assets on hand that would be available for settlement of the debt in the near-term.
(c) In extending a loan for a relatively long period of time the lender is most interested in the probability that the company will generate sufficient income to meet its interest payments and repay its principal. The lender would therefore be interested in predicting future net income using the income statement. It should be noted, however, that the lender would also be very interested in both the balance sheet and statement of cash flows—the balance sheet because it would show the amount of debt the company had already incurred, as well as assets that could be liquidated to repay the loan. And the company would be interested in the statement of cash flows because it would provide useful information for predicting the company’s ability to generate cash to repay its obligations.