Differentiate between a balance sheet and an income statement of a listed company. How are the two statements related? Why is it often necessary to standard the items in the financial statements? Describe how this could be implemented.How does the statement of cash flows differ from the income statement? What are the various components of the cash flow statement? Describe the contribution of each of the components in terms of their importance to the generation of cash of a company? Explain what is meant by the following statement: ‘A ringgit today is worth than a ringgit to be received in future.” Describe the possible factors contributing to this situation.Describe the essential differences between the following cash flow streams:Annuity versus perpetuityAnnuity due versus ordinary annuityIllustrate with an example each.What is a bond sinking fund? What is the purpose of establishing a sinking fund? Are bonds that provide for a sinking fund regarded as being risker than those without this type of provision? Explain.Explain the following statement: “Although long-term bonds are heavily exposed to interest rate risk, short-term bills are heavily exposed to reinvestment rate risk. The maturity premium reflects the net effects of these two opposing forces”.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Differentiate between a balance sheet and an income statement of a listed company. How are the two statements related? Why is it often necessary to standard the items in the financial statements? Describe how this could be implemented.
How does the statement of cash flows differ from the income statement? What are the various components of the cash flow statement? Describe the contribution of each of the components in terms of their importance to the generation of cash of a company?
Explain what is meant by the following statement: ‘A ringgit today is worth than a ringgit to be received in future.” Describe the possible factors contributing to this situation.
Describe the essential differences between the following cash flow streams:

Annuity versus perpetuity
Annuity due versus ordinary annuity

Illustrate with an example each.

What is a bond sinking fund? What is the purpose of establishing a sinking fund? Are bonds that provide for a sinking fund regarded as being risker than those without this type of provision? Explain.
Explain the following statement: “Although long-term bonds are heavily exposed to interest rate risk, short-term bills are heavily exposed to reinvestment rate risk. The maturity premium reflects the net effects of these two opposing forces”.

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