BYP 14-5 DECISION MAKING ACROSS THE ORGANIZATION
The current ratio increase is a favorable indication as to liquidity, but
alone tells little about the going-concern prospects of the client. From
The acid-test ratio decrease is an unfavorable indication as to liquidity,
especially when the current-ratio increase is also considered. This decline
The change in asset turnover cannot alone tell anything about either
solvency or going-concern prospects. There is no way to know the amount
The increase in net income is a favorable indicator for both solvency
and going-concern prospects, although much depends on the quality of
The 32-percent increase in earnings per share, which is identical to the
percentage increase in net income, is an indication that there has probably
BYP 14–5 (Continued)
The collective implications of these data alone are that the client entity
BYP 14-6 COMMUNICATION ACTIVITY
To: Abby Landis
From: Accounting Major
Subject: Financial Statement Analysis
There are two fundamental considerations in financial statement analysis:
(1) the bases of comparison and (2) the factors affecting quality of earnings.
Each of these considerations is explained below.
1. Bases of comparison. The bases of comparison are:
a. Intracompany—This basis compares an item or financial relationship
2. Factors affecting quality of earnings are:
a. Alternative accounting methods—Variations among companies in
the application of generally accepted accounting principles may
BYP 14-7 ETHICS CASE
(a) The stakeholders in this case are:
Dave Schonhardt, president of Schonhardt Industries.
Steven Verlin, public relations director.
(b) The president’s press release is deceptive and incomplete and to that
extent his actions are unethical.
(c) As controller you should at least inform Steven, the public relations
BYP 14-8 ALL ABOUT YOU
Student responses will vary. We suggest that in class you ask for a few stu-
BYP 14-9 FASB CODIFICATION ACTIVITY
(a) Discontinued Operations
205–20–45-1 The results of operations of a component of an entity that
either has been disposed of or is classified as held for sale under the
a. The operations and cash flows of the component has been (or will be)
(b) Extraordinary items are events and transactions that are distinguished
a. Unusual nature. The underlying event or transaction should possess
b. Infrequency of occurrence. The underlying event or transaction
(c) Comprehensive Income
The change in equity (net assets) of a business entity during a period
IFRS 14-1 INTERNATIONAL FINANCIAL REPORTING PROBLEM
(a) The company decided to sell its Baked Snacks business. It said it was
doing this in order to enhance earnings and focus its resources on its
core profitable divisions.
(b) During the year ended April 30, 2009 the company reported losses on
(c) The total recorded value of net assets at the date of disposal was