1.one of the major financial statements prepared by accountants is the balance sheet,which shows the financial status of a business entity at a particular instant in time
2.the owers’equity will then consist of the total amounts invested by the owner plus any cumulative profits retained in the business
3.by tracking net income from period toperiod,comparing changes in net income to economy-wide and industry averages,and examining changes in the revenue and expense components of net income,investors and other decision makers can evaluate the success of the period’s operations
4.the income statement shows how the entity’s operations for the period have increased net assets through revenues and deceased net assets by consuming resources
5.because a business enterprise is usually formed to return cash to the owners,and because creditors mustbe paid in cash,many decision makers want a financial statement focused on cash in addition to the income statement that focuses on changes in net assets
6.although less liquid than either cash or marketable securities,receivables are a major investment for many firms that also involve a trade-off between risk and profitability.
7. if a credit report from outside sources is not available for a customer,the firm’s credit standards are applied to the existing credit information about that customer,and the probability of delinquent payment or a bad-debt loss is assessed.
8.cash discounts are offered to reward early payments and thereby to reduce the collection period and the amount invested in accounts receivable.
9.the investment in accounts receivable results from a firm’s credit sales,and its level indicates the extent to which its credit and collections policies are used to stimulate sales.
10.trade credit is fairly sensitive to interest rate changes,whereas consumer credit is largely affected by changes in income and unemployment.
11.the first example states that payment is due within t days from a specified date,usually the date of the good’s receipt.the second allows a discount of d% if payment is made within t days;otherwise,the full amount is due within t days.
12.most small companies sell overseas this way,and several large corporations rely on brokerage contracts where the market does not justify investment in foreign facilities.
13.where there is a substantial market,an exporting company may choose to eliminate middlemen by establishing foreign distribution centers,thereby taking
control of its marketing and product distribution systems.
14.foreign expansion can be accomplished through a joint venture that brings together companies from different nations to form a commercial alliance.
15.prior to reorganization in 1986,Du Pont generated nearly half its $1.3billion foreign income in polymer products from agency contracts in more than a hundred different countries.
16.In contrast to licensing and franchising , which do not require investments by all parties , joint ventures are newly constituted enterprises in which the affiliates all make equity investments and consequently have ownership responsibilities .
17.Acquiring an existing overseas company allows the parent to penetrate trade barriers immediately and avoid start-up complications by having a functional organization in place .
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