University of Phoenix
Through the analysis of three companies of different sectors, this paper will demonstrate some basic concepts, techniques, and conventions of financial accounting. The three sectors covered include manufacturing (EXXON), investment (Bank of England), and sales (Apple Inc.) companies. For these three companies, basic calculations which are seen in financial statements were completed, which were used to discuss differences in industries, measurement conventions, and determine differences in accrual and cash accounting.
How Differences in Industries Affect Presentations
When discussing different industries and the financials associated with them, it is not always an apple to apples comparison. For example, when we take a statistic, for this example we will take the measure of leverage or the debt ratio, and compare two or even three, as we were required to do; separate industries have different standards and operating parameters that are acceptable. In one industry a high debt ratio might be acceptable as a leveraged business is the only way to continually grow. However another industry might have the opposite true where a high debt ratio is a sign of weakness and trouble for the business. In the businesses that we chose, the manufacturing company had a low debt ratio or measure of leverage of 7%, thereby showing it to be a very viable business going forward. On the other hand, our retail company had a debt ratio of 14%, although not very high, it was double what the manufacturing company was. In reality the retail company is considered a strong buy and viable investment company with a positive outlook. So, each of the valuations we use need to be compared to comparable industries, in order to gain a valuable insight into that corporation which has real value to base investment and managerial decisions on.
How Different Measurement Conventions (IASB and... [continues]
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(2010, 08). Financial Statement Analysis. StudyMode.com. Retrieved 08, 2010, from http://www.studymode.com/essays/Financial-Statement-Analysis-370846.html
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