Discussion:
Assume that you are an investor and considering the buyout of an existing publicly traded company. There are several areas you plan to focus on during your due diligence process in order to determine the organization's potential as a long-term investment.
Discuss the key factors you would evaluate on the statement of cash flows and what significance the income from operations line item has on your decision.
In addition, discuss why the accounts receivable turnover rate and accounts payable turnover rate would be of interest in your decision making.
Lastly, explain what meaningful insight you might obtain by reviewing the sales allowances and sales discounts amounts for this company.
Readings:
In your Financial Accounting textbook, read:
?Chapter , "Communicating and Interpreting Accounting Information"
?Chapter , "Reporting and Interpreting Sales Revenue, Receivables, and Cash"
Libby, R., Libby, P. A., & Short, D. G. (2014). Financial accounting (8th ed.) [Custom text bundle]. New York, NY: McGraw-Hill.