Reference no: EM132175099

Learning Activity #1

Part A

What role does a company's strategic plan play in the process of financial management? Does it ever make sense for a profitable company with positive cash flow to seek external financing? Why or why not?

Part B

Discuss the purpose of each of the following financial statements: income statement, balance sheet, statement of cash flow and statement of owner's equity.

Identify five business questions that can be answered by using financial accounting information. For each question, indicate what financial statement (or statements) would be most helpful in answering the question, and why.

Learning Activity #2

There is a lot of information that students were exposed to over the past 8 weeks. Using topics from various weeks, how are the topics interrelated and how has the course helped to promote connections to understanding the role of business in a global business environment?

Accounting is a systematic method for providing accurate information on business transactions, and is often referred as the "language of communication" in terms of the financial affairs of a business. Chapter 16 focuses on the importance of accounting and finance.

The primary objective of accounting is to report the financial position of the business, including profits, losses, assets, liabilities, and owner's equity. Understanding the purpose and use of financial statements is essential for several reasons, including business decision making, tax, economic, and business performance.

One important financial statement is the balance sheet. The balance sheet is a snapshot of a company's assets, liabilities, and equity, and is often used as a measurement tool by creditors to determine credit-worthiness and assurance that a company can repay a loan. Understanding the balance sheet, the sequence, and components is significant because it conveys the relationship between what the company owes and owns.

Further, the ability to analyze financial ratios such as liquidity, equity, and profitability ratios helps determine whether the company is managing its resources effectively. Financial ratios are also used to identify areas of a company's financial strengths and weaknesses that when identified, a company can implement measures to avoid financial crises.

When a company's revenue equals the total cost of making the product, the "break-even point" has been reached, which means zero profits are being generated.

The break-even point is a conceptual model used to identify the financial structures of a project or product with the purpose of determining a time frame when sales will be reached, and in the alternative, the point when losses can be anticipated.

The ability to calculate the break-even point is useful for determining the exact points the company or project will be profitable and allows for certain assumptions to be made so that the best pricing strategy can be created.