1. An officer of Westway Corporation recently commented that when he receives the firms financial statements, he...

Question:

1. An officer of Westway Corporation recently commented that when he receives the firm’s financial statements, he looks at just the bottom line of the income statement—the line that shows the net income or net loss for the period. He said that he does not bother with the rest of the income statement because “it’s only the bottom line that counts.” He also does not read the balance sheet. Do you think this manager is correct in the way he uses the financial statements? Why or why not?

2. The president of Brown Corporation is concerned about the firm’s ability to pay its debts on time. What items on the balance sheet would help her to assess the firm’s debt-paying ability?

3. Why is it important that a firm’s financial records be kept up-to-date and that management receive the financial statements promptly after the end of each accounting period?

4. What kinds of operating and general policy decisions might be influenced by data on the financial statements?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...