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Chapter 15: Using Accounting Information

Chapter 15: Using Accounting Information. 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.

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Chapter 15: Using Accounting Information

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  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

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