© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 1

Chapter 15: Using Accounting Information

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 2

Learning Objectives

1. Explain why accurate accounting information and audited financial statements are important.

2. Identify the people who use accounting information and possible careers in the accounting industry.

3. Discuss the accounting process.4. Read and interpret a balance sheet.5. Read and interpret an income statement.6. Describe business activities that affect a firm’s

cash flow.7. Summarize how managers evaluate the financial

health of a business.

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 3

Recent Accounting Scandals Why Audited Financial Statements Are

Important Reform: The Sarbanes-Oxley Act of 2002

Why Accounting Information Is Important

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 4

The People Who Use Accounting Information Different Types of Accounting Careers in Accounting

Who Uses Accounting Information

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 5

The Accounting Cycle• Step 1: Analyzing Source Documents• Step 2: Recording and Posting Transactions• Step 3: Preparing Financial Statements

The Accounting Equation

The Accounting Process

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 6

Assets1. Current Assets2. Fixed Assets3. Intangible Assets

Liabilities and Owners’ Equity1. Current Liabilities2. Long-Term Liabilities3. Owners’ or Stockholders’ Equity

The Balance Sheet

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 7

Revenues Cost of Goods Sold Operating Expenses Net Income

The Statement of Cash Flows

The Income Statement

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 15| Slide 8

Using Accounting Information to Evaluate a Potential Investment

Comparing Data with Other Firms’ Data Profitability Ratios Short-Term Financial Ratios Activity Ratios Debt-to-Owners’-Equity Ratio Northeast’s Financial Ratios: A Summary

Evaluating Financial Statements