Reflections Post Ch. 17

During this brief, but important lecture the class discussed some of the basic principles of accounting.

-Always note that equation of acct. is Assets=Liabilities+Stock Holder's Equity

Accounting is important to help determine the health of a company and organizations. It allows the following to perform their task:

Managers: to plan and control

Investors: to evaluate health of business

Suppliers: to evaluate credit risk

Government: to confirm tax liability and moderate business

There are other equations to interpret certain useful data of a firm such as:

Return on Sales: Net Income / Net Sales, to figure money made per item sold

Working Capital: Current Assets - Current Liabilities, how much cash firm is using

Debt to Equity: Total Liabilities / Equity, to figure how much of your worth is from debt