Financial Statement Paper

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Financial Statements Paper II Marlene Rohme ACC497/Advance Topics in Accounting Research Greg Moore December 7, 2010 Abstract When one is assessing financial statements management should have a working knowledge of what the financial statements means. Without the knowledge of what the statements are concerning no organization can fully function. This paper is to tie the statements with the management’s assessment of said financial statements. Management's assessment agrees with the financial assessment that was in the financial statements paper Part I. In coming to the conclusion to the assessment that was done in the financial statement paper I the trend analysis was used. According to the textbook, Trend analysis compares individual financial statement line-items over time, with the general goal of identifying significant sustained changes ("trends") that exist. These changes are typically described in terms of dollar amounts as well as year-over-year percentages. A year-over year percentage simply expresses the change in the current year as a percentage of the prior year total. The calculation used would be: year over year%= Change This Year X 100% = (Current Year's Total - Prior Year's Total) X 100% Prior Year's Total Prior Year's Total. Ratio analysis is another technique that can be used when coming to the assessment that was made. Ratio analysis involves comparing an amount for one or more financial statement items to an amount for other items for the same year. Ratio analysis takes into account differences in the size of amounts being compared to allow people to evaluate how well a company has performed given the existing level of other company resources. A company's ratios can be calculated for each year and compared across years to identify additional trends not revealed in an analysis of individual

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