Chapter 3 , Financial Management Theory and Practice

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Financial management theory and practice
Chapter 3
Page 114 questions :-
A- Annual report :- it’s a statement that gives an accounting picture of a firms operation and its financial position , there is two types of information are provided in annual report
First :- the verbal section witch often represents the firms operation result during the past two years or any period , and discuses new developments that will effect future operation . and explain why things turned out the way they did .

Second :- the presentation for four basic financial statements ( the balance sheet , the income statement , the statement of retained earnings and the statement of cash flows). these four statements illustrate (what has actually happened to assets , earnings , and the dividends over the past few years .

These information is used by investors to help form an expectation about the future earnings of the firm and dividends

B- Balance sheet :- it’s a snapshot of firms financial position in the last day of given period . and a balance sheet changes daily because of :- * Inventories are bought and sold .
* Fixed assets are added or retired .
* A bank loan balances are increased or paid down.
Its composite of a table of two sides :-
The left side of a balance sheet lists assets (which are the things that company owns) in order of liquidity or the length of time ,
The right side lists the claims that ( supplies , banks , bondholders , stockholders ) have against company and they must be paid in order ) .

C– the income statement :- reflects the financial performance over each of a given period of time ( monthly , quarterly and annually ) . witch contains net sales excluding (EBITDA) .which means earning before interest , taxes , depreciation and amortization .

D- depreciation :- its a policy applies by accountants , rather than treat the entire...
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