Basic HTML Version
Q
uantitative
R
easoning &
P
roblem
S
olving
400
© 2014 Pacific Crest
Balance Sheet
Impact of Error on
Error in Inventory
Assets
=
Liabilities
+ Shareholder's Equity
Understated
Understated
No Effect
Understated
Overstated
Overstated
No Effect
Overstated
●
Investors need to realize that financial statements are one piece of an investment decision
Example
: Deciding to invest in a company after looking at the financials online.
Why?
Many items that influence the profitability of an organization are not reflected on
their financial statements including information on the industry, the effectiveness of
management, the efficiency of theworkforce, competitivemarket forces, technological
innovations in the field, and management and workforce quality.
A
re You Ready?
Before continuing, you should be able to ...
I can...
OR
Here’s my question...
discuss the components of the accounting
equation used for the balance sheet
state the major categories that are part of
each financial statement
indicate the time frames used for each type
of financial statement
calculate net income and stockholders’
equity
P
lan
How to complete the activity
1. Use the publicly-provided financial information from a business (Model 1) and a not-for-profit
organization (Model 2) to analyze the financial position of each.
2. Answer the Critical Thinking Questions.
3. Complete the remainder of this activity (from Demonstrate Your Understanding through Assessing
Your Performance) on your own, or as directed by your instructor.
M
odel(s)
Exemplars and representations
Content available online at companion website.
Analyze Model 1 using the Methodology for Analyzing an Income Statement (both the model and a
helpful form are available on the companion website).
Analyze Model 2 using the Methodology for Analyzing a Balance Sheet (both the model and a helpful
form are available on the companion website).