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Financial Statement

In: Business and Management

Submitted By irenecherish
Words 330
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Accountants: current standing and immediate past performance of a firm.
Financial analyst: more forward looking

Principles: accrual accounting: realized when the good sold or service performed. Expense side made to match revenues
Categorization of expense Operating: expenses that provide benefits only for the current period Financing: arsing from the non-equity financing used to raise capital for the business—interest expense Capital: generate benefits over multiple periods

Income statement: messure how profitable a firm during financial period
Revenue
(-)Operating expense: expense purchased to create revenue. Or it will carried over as inventory into the next time * Research and development(violate requirment) * Lease from leased assets * One-time restructuring
(-)Depreciation(tangible asset) or Amortization(intangible asset)(capital asset) Written off over lifetime * Straight line depreciation—tax purpose * Accelerated depreciation--- report
(=) operating income- income generated by a firm’s asset in place--misleading * R&D expenses are capital exp * Lease expenses are financing exp * Accounting depreciation not economic dep (loss in value from using the asset)
(-) interest expense * Tax deductible
(=) Taxable Income * Different approaches for computation for tax and reporting, taxable income in the reported will be different (generally higher)than in the tax books
(-) Taxes Tax=taxable income*tax rate * Effective tax rate (reported taxble income higher that true taxable income) usually lower that true average tax rate
(=) Net income * - preferred dividend
(-) Losses (+) profit not associated with operations
(-) profits or losses associated with Accounting Changes number of shares outstanding
(=) Earnings per Share

How accountants Value Assets 1. belief in

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