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Accountants focus on creating financial statements, whereas finance professionals mostly use these statements to evaluate a firm and answer questions about its performance. Indicate which of the following financial statement would be the most helpful.

a. How much cash is a firm generating through operating, investing, and financing activities?
b. How much debt and equity has the firm issued to finance its assets?

If compensation for senior management is based on short-term performance of the firm, in the short run the firm is likely to:

a. Overstate its earnings
b. Understate its earnings

Respuesta :

anthougo

Answer:

1. The financial statement that would be the most helpful for a finance professional to evaluate how a firm's performance is:

a. How much cash is a firm generating through operating, investing, and financing activities?

2. If compensation for senior management is based on short-term performance of the firm, in the short run the firm is likely to:

a. Overstate its earnings

Explanation:

This financial statement is provided by the Statement of Cash Flows. The statement provides the performance report about a company's liquidity and long-term solvency.  The information about how much debt and equity the firm has issued to finance its assets will be obtained from the statement of financial position (known as the balance sheet).  This statement does not show the performance of a firm, but its financial position as of a given date.

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