Week Four Discussion Questions
· Why are companies required to prepare a statement of cash flows? Why is the statement of cash flows divided into three sections? What does each section tell you about a company’s operations?
· What are some common ratios used to analyze financial information? Which are the most important? What are some examples of how ratios are used in the decision-making process?
· Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. What are the differences between these two methods?
· What are the differences between the direct and indirect presentation of cash flows? Why does the Financial Accounting Standards Board allow both methods? Which do you prefer? Why?
· Why must preferred stock dividends be subtracted from net income in computing earnings per share? Why is common stock usually not issued at a price that is less than par value?
What three conditions must exist before a cash dividend is paid? Contrast the effects of a cash dividend and a stock dividend on a corporation’s balance sheet.