Reflection-Week Three Team C University of Phoenix Steve Callaway

Reflection-Week Four This reflection is a summary of Team C s intake during week four in the Principles o f Accounting II, from University of Phoenix. Each student has contributed their thoughts, opinions, and understandings from the curriculum. Ratio Analysis In week four we learned that Ratio Analysis is the expression of the relationshi p among items that are identified on the financial statement data. A ratio expre sses is quantity and another that are expressed in a mathematical process. To an alyze the, primary financial statement, we learned that ratios evaluate liquidity, profitability, and solvency. Liquidity Ratios measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. P rofitability Ratios measure the income or operating success of a company for a g iven period of time. Solvency Ratios measures the ability of the company to surv ive over a long period of time. There are three financial tools that companies use to evaluate the worth of thei r financial statement data: Horizontal Analysis reviews of financial statement d ata extends of over. Vertical Analysis is the financial information that focuses on the base amount of the financial statement. Ratio Analysis is the expression of selected items that are revealed on the financial statement. Additionally, we learned how to apply ratios, such as vertical and horizontal ra tios. Companies use financial ratios in order to analyze their financial perform ance. Bankers, stockholders, and accountants may also use financial ratios to ev aluate financial spreadsheets. The ratios can give individuals the ability to un derstand financial data and make sound decisions based on the company s profitabilit y, liquidity, and efficiency. There are different ratios under liquidity ratios, profitability ratios, and solvency ratios. Statement of Cash Flows We learned that the statement of cash flows is divided into three sections becau se the Operating activities are the income statement items. The investing activi ty is the changes that over a period of time changes the outlook of long-term as sets. Financing activity changes in long-term liabilities and stockholders equity. The operating activities encompass the flow of cash that will effects the transa ctions that are used to generate revenues and expenses. The investing includes o btaining and disposing of investment and property, plant, and equipment, and len ding money, and collecting the loans. Financing activities the deals with cash f rom issuing debt and then repaying the amount borrowed, which is cash is obtaine d from stockholders, repurchasing shares, and paying dividends. The operating ac tivities category is the most important. It shows the cash provided by the compa ny operations. This source of cash is generally considered to be the best measur e of a company s ability to generate sufficient cash to continue as a going concern. Additional, we learned how to prepare a statement of cash flows using both direc t and indirect methods. The direct method reports the cash in disbursements that are from operating activities. The direct method deducts from operating cash re ceipts the operating cash disbursements. The direct method results in the presen tation of a condensed cash receipts and cash disbursements statement. The indire

ct method starts with net income and converts it to net cash flow from operati ng activities. In other words, the indirect method adjusts net income for items that affected reported net income but did not affected cash. To compute net cash flows from operating activities, noncash changes in the income statement are ad ded back to net income, and net cash credits are deducted (Weygandt, Kimmel & Ki eso, 2010). Preferred and Common Stock Preparation We learned that the subject of preparing journal entries is associated with pref erred and common stock to be the most interesting. Mostly, because we know that we will be able to apply it in the near future. The issuance of common stock onl y affects paid in capital accounts and that they are always recorded as Common stoc k at its par. We also discussed that preferred stock takes a preference over commo n stock when receiving dividends. Should the company have low dividends to disbu rse; the preferred stockholders will receive their dividends prior to the common stockholders. A disadvantage this is that the preferred stockholders receive a locked in amount, which means they cannot receive more dividends if the company s p erformance is high. In order for a company to issue cash dividends, the company should ensure that they have adequate r earnings, and, cash, and a declaration o f dividends. Companies will not pay out dividends unless the board of directors votes to do so. Finally, we learned that once it s declared that the company will pay out dividends, the company becomes a liability.

References Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2010). Financial Accounting, Sev enth Edition. John Wiley & Sons Inc.