Description
Part 1
A major aim of financial information is to provide inputs for decision‐making. Accounting can be described as the information system which identifies, records, and communicates the financial activity of an entity to others. The users of accounting information are easily separated into two groups: internal users and external users.
Respond to the following in a minimum of 175 words: (2 post @ 175 words each)
Discuss who are the internal users and external users of accounting information.
Discuss what the primary concerns are to both groups.
Part 2
Purpose of Assignment
This activity helps students recognize the significant role accounting plays in providing financial information to management for decision making through the evaluation of financial statements. This experiential assignment requires students to use ratios to evaluate and analyze a company’s liquidity, solvency, and profitability.
Two-Rivers Inc. (TRI) manufactures a variety of consumer products. The company's founders have run the company for thirty years and are now interested in retiring. Consequently, they are seeking a purchaser, and a group of investors is looking into the acquisition of TRI. To evaluate its financial stability, TRI was requested to provide its latest financial statements and selected financial ratios. Summary information provided by TRI Document presented below.
TRI Documents
Required:
a. Calculate the select financial ratios for the fiscal year Year 2. (use MS word or excel but excel is more recommended)
b. Interpret what each of these financial ratios means in terms of TRI's financial stability and operating efficiency.
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Explanation & Answer
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Current Assets
current liabilities
Current ratio
Cash
marketable securities
accounts receivable
9900
6300
1.571429
400
500
3200
Acid test ratio=(cash+Accounts receivable+MarketbleSecurities)/Current Libilities)
0.650794
Times interest earned=income before income taxes and interest expense/Interest expense
8.844444
Dept-to-Equity Ratio=Total liabilities/equity of stockholders
0.954023
Inventory Turnover=Cost of goods sold/Average Inventory
Average Inventory=
5600
Cost of goods
17600
3.142857
Running Head: ACCOUNTING
Accounting
Student’s Name:
Course Title:
Date:
ACCOUNTING
1
Part One
Internal and external users of Accounting Information
The internal users refer to the individuals within the business who make use of the
financial information in the decision-making process. Examples of the internal users are the
managers of the organ...