1) What are three applications of financial statement analysis? Describe three different uses.

2) Some asset valuations using historical costs are highly relevant and very representationally faithful, whereas others may be representationally faithful but lack relevance. Some asset valuations based on fair values are highly relevant and very representationally faithful, whereas others may be relevant but lack representational faithfulness. Explain and provide examples of each.

3) Firms value inventory under a variety of assumptions, including two common methods: last-in, first-out (LIFO) and first-in, first-out (FIFO). Ignore taxes, assume that prices increase over time, and assume that a firms inventory balance is stable or grows over time. Which inventory method provides a balance sheet that better reflects the underlying economics, and why? Which method provides an income statement that better reflects the underlying economics, and why?