Financial Management Theory and Practice Essay

A- Annual report - its a statement that gives an accounting picture of a firms operation and its financial position , there is dickens types of information are provided in annual reportFirst - the verbal section witch often represents the firms operation result during the past two long time or any period , and discuses new developments that will effect future operation . and explain why things turned out the way they did .Second - the monstrance for four basic financial statements ( the eternal rest sheet , the income statement , the statement of retained simoleons and the statement of cash flows). these four statements illustrate (what has truly happened to assets , earnings , and the dividends over the past few years .These information is used by investors to assistant form an expectation about the future earnings of the firm and dividendsB- equilibrise sheet - its a snapshot of firms financial position in the last day of given period . and a end sheet changes perfunctory 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 get across 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 in good order 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 cognitive process over each of a given period of time ( monthly , quarterly and annually ) . witch contains net sales excluding (EBITDA) .which means earning before interest , taxes , wear and tear and amortization .D- depreciation - its a policy applies by accountants , rather than treat the entire purchase of assets in a purchase year , they treat the expenses of assets by the assets useful keep , in many years after , and it calculates in tangible assets in balance sheet .E- Net worth or common equity - its the asset net of liabilities and sum of common stocks and retained earnings , In case a companys assets are sold and liabilities and preferred stocks were actually worth their book value , then the company in case of bankruptcy can sell its assets to pay liabilities and preferred stocks and remaining cash would die to common stakeholders .F- (EBITDA) - its earning before interest , taxes , depreciation , and amortization .G- STATEMENT OF CASH FLOW - represents a claim against assets , instead of distributing the money as dividends , they spend it on buying new assets .H- The statement of cash flow - its the amount of cash reported on its year-end balance sheet , it can be used in variety of ways , (pay dividends , increase inventories , keep it in bank , or to invest in fixed assets .(3-2) what four statements are contained in annual report ?Answer -1- the balance sheet ,2- the income statement ,3- the statement of retained earnings4- the statement of cash flowsThese information is used by investors to help form an expectation about the future earnings of the firm and dividends . (3-3)If a typical firm reports $20 million of retained earnings on its balance sheet, could its directors declare a $20 million cash dividend without any qualms whatsoever?Answer -No , because the retained earning could be used in variety of ways , like pay dividends , increase inventories , keep it in bank , or to invest in fixed assets .(3-4)Explain the following statement While the balance sheet can be thought of as a snapshot of the firms financial position at a point in time, the income statement reports on operations over a period of time.Answer -Because the balance sheet changes daily as inventories are bought and sold , fixed assets are added or retired , or as a bank loan balances are increased or paid down . while the income statement is the financial performance of a firm during that period , and its more precise to analyze . (3-5)What is operating capital, and why is it important?