You have been named the Chief Financial Officer (CFO) of a two year old company, ABC Analytics. Financials have been prepared by a bookkeeper. As CFO, you responsible for the preparation of accurate financials, analysis and review of the financials before they are released and communication of the results of your company to banks, investors, creditors and the government, as necessary. One of the members of the board has asked you to prepare a memorandum which addresses the following points. Each point should be answered in a separate paragraph and be written to be as clear and concise as possible (2 points each).

a. What are the four major financial statements and discuss their purpose?

b. What is the purpose of a budget and what are the components?

c. Why is it important for the CFO and his/her staff to analyze variances of budget to actual or forecasted to actual amounts, and investigate reasons for significant variances on a timely basis?

d. If you are an investor in ABC Analytics, what are the pitfalls in reviewing earnings per share without accompanying pertinent information, i.e. what are the things that can distort earnings per share from year to year? Why do you care about diluted earnings per share?

e. Why is managements discussion and analysis included in the annual report? In order to obtain maximum credit, the Individual Paper should

Demonstrate a comprehensive understanding of accounting and business concepts, analysis, and unique insights. Properly citing FASBs or other authoritative literature helps demonstrate this ability.

Be clear and concise, directly addressing issues with the proper use of English grammar and spelling, free of errors. Make well developed business analyses with strong supporting arguments.