I Question 1: What Would Your Accountant Say? A meeting of company executives has been called to go over the annual financial report, which includes the balance sheet, income statement, statement of stockholders' equity and statement of cash flows. The new VP of Marketing (who has never had an accounting course) asks for a brief description of the purpose of each statement, and how they all fit together? What would your accountant say to the executives? I Question 2: What Would Your Finance Manager Say? Your firm needed additional financing to expand the business. The firm reported net income in the last two years of business but reported negative cash flows from operating activities on its two most recent statements of cash flows. The firm's balance sheet reported substantially more liabilities than shareholders' equity. You ask your finance manager whether the firm should sell stock or borrow from its bank in order to secure financing for the business expansion. What would your finance manager say? I Question 3: Theory Vs. Practice To illustrate the accounting process, Chapter 2 reported financial statements on an annual basis. In reality, corporations report financial statements to their investors, creditors, and the Securities and Exchange Commission (SEC) quarterly. Moreover, many firms will compile income statements and balance sheets on a monthly, or even a weekly basis, for internal management purposes. Explain why firms produce financial statements more frequently than once a year