Reference no: EM131198905

Question 1

Financial Statement Interpretation is a skill highly sought after in the accounting world. That's because professionals with this skill provide companies an accurate picture of where they have been and where they will be.

Select a specific industry and share what you feel are the one or two specific skills necessary in that industry to interpret their financial statements. Explain with examples.

Respond to this...The first thing that came to mind fits with all industries. The thing to help an accountant interpret financial statements is to know what is normal. The amount of increase or decrease in one account may be normal for one industry; but not for another. An increase or decrease may be red flags for one industry; but not for another. Another way knowing an industry is determining the value of an industry specific asset. It helps that the accountant knows from experience the depreciation value and the expected useful life.

Respond to this...When it comes to the financial statements and the interpretation of them, the first thing that comes to mind is research. In order to be able to interrupt these statements in a legitimate fashion one needs to know what they are looking at in order to be able to read it properly. Ratios are great and all but if you do not understand what the normal is for that particular industry, your interpretation will be incorrect. The skill of being able to research is arguably the best one to have when it comes to this subject. Another skill that is almost universal is the reading of trends on a macro level. While you may have only a small piece of the Macro pile, the trend within that pile would be able to tell you if the company is on the same page as the rest. Yeas there may be a few outliers and companies that will buck the trend, but ultimately those are red flags as a whole. Those upswings on a downward trend are not something that any accountant would want to see. This would mean that there is a potential problem and thing will need to be gone over to make sure that the information is accurate.

Question 2

Cost Volume Profit Analysis looks at the behavior of total revenues collected, total costs, and the operating income based on differences in units sold, their sales price, variable cost per item, and the overhead fixed costs. Management undertakes a series of steps during each cost volume profit analysis review, which include:

1. Understand the issue
2. Gather information
3. Develop predictive alternatives
4. Select an alternative to address the issue
5. Implement the alternative and evaluate its performance

Using the above framework for evaluating an effort under cost volume profit analysis, describe a specific example and how you would use these steps to determine the ultimate decision to be taken.

Respond to this...Cost volume profit analysis is a helpful tool used to obtain specific information needed to make smart decisions. For example, if a cleaning service wanted to know how many clients it needed to obtain in order to produce a certain profit it would use the five step decision making process and CVP analysis. In this example, the questions is how many clients are needed to make $10,000 operating income, which is step one of the decision making process. Step two is gathering information such as determining variable cost per unit, fixed costs, and service price. It may also be necessary to research competitors pricing and market demand. Step three includes the CVP analysis. Managers make predictions such as how reducing fixed costs would alter the number of clients or how demand may influence the cost of the service. Managers research and assess the possibilities and make an educated decision based on available information such as break-even points or product mix alternatives. Once an appropriate alternative is determined, it can be implemented and the number of clients accurately calculated. This is a valuable tool which helps companies make successful strategic decisions.

Question 3

Search the Internet for a retirement planning calculator. Use the website you selected to determine how much money you need to put away to help you achieve your retirement goal. Assume that you are 50 years old and plan to retire in 16 years. You have one dependant and $100,000 in savings.Your current annual income is $85,000. Your goal is to be able to generate an annual retirement income of $60,000, including Social Security benefit payments. Assume a Social Security benefit of $1500 per month.

First, post the address of the website you used. Then critique the site - its ease of use, its clarity, the value of any conclusions reached. To what extent would this site help investors understand their financial needs and the financial markets?

Respond to this...I used a sit called Vanguard. This site was beyond easy to use. It was very clearly laid out and helped me understand retirement needs a little bit better! This site can be used to see how much more a month you will need vs how much you have coming to you so far in income. This site helps users get a better grasp of how the whole retirement plan works.