Question

develop conclusions about the company’s performance based on the financial information? Cash balance, end of year (under the statement of cash flow) Notes payable (long term) ( Balance Sheet) Retained Earnings ( Balance Sheet) Please respond.

Answer 1

• Cash balance end of year(Under the statement of cash flows) : Cash is one of the most important element for running a business. Cash at end of the year under statement of cash flow statement can be compared with cash at beginning of the year to analyse that whether company was able to generate cash during the year or not. When cash at end decreases at end it indicates that company has invested money or was not able to generate enough cash.
• Note payable(Long term)(Balance sheet) : Note payable(long term) represents that company has borrowed money from outside. If return on assets is greater than cost of debt than it is beneficial to have such borrowings in the company. Further, excess Note payable is also dangerous.
• Retained Earnings(Balance sheet) : Retained earnings shows the company's profit of past year that was retained by the company and paid as dividend for future growth. A strong balance in retained earnings shows how well a company is doing it's business and even in the event of losses in few financial year company is not going to shut down. However, on the other hand a weak or negative retained earnings is very dangerous for a company.