Financial Statements

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Financial Statements

What is an auditor's adverse opinion ?

Asked Wednesday, January 10, 2001 by an anonymous user
An independent auditor's opinion expressing that a firm's financial statements (balance sheet, income statement, cash flow statement)do not reflect the company's position accurately.
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Financial Statements

What is an auditor's qualified opinion ?

Asked Wednesday, January 10, 2001 by an anonymous user
An auditor's opinion expressing certain limitations of an audit.
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Financial Statements

What is forecasting ?

Asked Wednesday, December 27, 2000 by an anonymous user
Forecasting is a projection of the anticipated financial performance of a company. Forecasts typically include a projected income statement, a pro-forma balance sheet and a cash flow statement. In order to arrive at projected figures, extensive research should be done to including statistical information on the competition, product trends and client demographics. This information will help you obtain reasonable estimated sales amounts. You should also get quotes from suppliers and realtors to obtain estimated expense amounts. Projections are not a picture of what you would like to see happen to your company, but carefully calculated, realistic numbers. Speak to your local CPA to assist you in this process.
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Financial Statements

What is the consistency criterion ?

Asked Wednesday, December 27, 2000 by an anonymous user
The consistency criterion states that the accounting procedures used at a given time should conform with the procedures previously used for that activity.
Such consistency allows data of different periods to be compared. This is important for comparative financial statements such as the income sheet, balance sheet and cash flow statement.
If there is a change in the consistency or accounting methods, the financial statements have to be restated for consistency purposes.
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Financial Statements

What is the disclosure principle ?

Asked Wednesday, December 27, 2000 by an anonymous user
The disclosure principle requires that the financial statements inclusive of the income statement, balance sheet and cash flow statements present the most useful material amount of relevant information. Notes may be included to the financial statements for additional disclosure. All information that is necessary in order not to be misleading and for investors to make informed decisions if applicable.
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Financial Statements

What is a Cash Flow Forecast ?

Asked Monday, October 16, 2000 by an anonymous user
Most businesses operate seasonally. They have busy periods and slow periods. They are cash rich at times and cash poor at other times. A cash flow statement helps determine whether the business will have enough cash to pay bills in the slow periods. It will help management know if and when they may need to look for financing.
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Financial Statements

What is the Turnover of Cash Liquidity ratio ?

Asked Wednesday, October 11, 2000 by an anonymous user
The Turnover of Cash Liquidity ratio evaluates the adequate means that a company has to finance sales without struggling to pay for materials or goods that the company is buying. Net sales, divided by working capital = TOC Ratio. (Working capital = current assets, minus current liabilities). The generally accepted standard is 5 or 6 times working capital, but may differ depending on your industry.
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Financial Statements

What is the Debt to Equity Ratio ?

Asked Wednesday, October 11, 2000 by an anonymous user
This ratio illustrates the relationship between capital contributed by the creditors (such as banks and suppliers) which loan a business cash and the owners equity remaining in the business. It is commonly used to measure the degree of financial leverage of the business. The Total Long-Term Debt, divided by Stockholders' Equity = DTE Ratio. (Stockholders Equity = Total Assets, minus Total Liabilities).
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Financial Statements

What is the Rate of Return On Sales Ratio ?

Asked Wednesday, October 11, 2000 by an anonymous user
Operating Income, divided by Net Sales = ROROS Ratio. This ratio illustrates how much net profit was derived from every dollar of sales. It helps indicate if the business is generating enough sales to cover fixed costs and leave an acceptable residual profit.
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