AndersonMichael:Assignment 4-Reporting to Management.pdf

Business Accounting Presentation explaining Balance Sheet, Profit and Loss Statement, Statement of Cash Flows. Cash basis accounting and accrual basis accounting. Reporting financial statements to management.

1. Michael B. Anderson 04/30/2024
Assignment 4: Reporting to
Management

2. GemStar Productions
Balance Sheet
•The purpose of the balance sheet is to
report the assets, liabilities and
shareholder equity that the company
possesses.
•It is the basis for computing rates for
investors
•1 of 3 core financial statements used to
evaluate businesses.

3. Ratios
Debt to Asset, Return on Assets, Return on Equity
•Debt to Asset ratio- Assets divided by Liabilities= Debt to Asset
•GemStar Production DTA ratio is 0.6183 or 61%
•Return on Assets ratio- Net Income divided by Total Assets x 100 = Return on Assets
•GemStar Production ROA ratio is 5.66%
•Return on Equity ratio- Net Income divided by Shareholder equity
•GemStar Production ROE is 0.1483 or 14.83%

4. GemStar Productions
Profit and Loss Statement
•The purpose of the Profit and Loss
Statement is to reflect the revenue,
costs, expenses and, profit and losses
during a specified period of time.
•It is formulated using either the cash or,
accrual method.
•Essential statement used in conjunction
with the Balance Sheet and, Statement
of Cash Flows to evaluate businesses.

5. GemStar Productions
Statement of Cash Flows
•The purpose of the Statement of Cash Flows
is to track the inflow and outflow of cash.
•It measures how well a company generates
cash to pay it’s debt obligations and, fund
operations.
•The 3 main components of a Statement of
Cash Flows are: Operating Activities,
Investing Activities and Financial Activities.
•It allows creditors to see how liquid a
company is and, could use this statement to
determine a company’s credit worthiness.

6. Internal Controls
GemStar Productions
•Authorization- : In order to prevent unauthorized purchases and misallocations of funds, I elected to include layers of
approval authorization to ensure each transaction is made responsibly.
•Documentation- To prevent any gaps of information and minimize fraud, all transactions must be documented at the
time of approval.
•Reconciliation- Due to the fact that human error is inevitable, we would have to set in place procedures to cross
check financial statements and documents to ensure that any losses or misappropriated funds have been identified
and the situation is rectified quickly to ensure more loss has not been taken.
•Security- To control the integrity of physical assets, we must secure them using locks on doors, safes, and security
cameras. We will also have to make sure that computers and other digital assets are properly secured using strong
passwords and even 2 Factor Authentication to ensure no unauthorized personnel can access proprietary
information and resources they are not supposed to have access to.
•Seperation of Duties- This is done to reduce risk by dividing work duties among multiple colleagues within the entity.
It creates a checks and balance system and, ensures that the power to make a decision is not solely in one person’s
hands.

7. RECAP
Key Terms and Concepts
•Debit- An accounting entry that either decreases a liability or, increases an asset.
•Credit- An accounting entry that increases a liability or, decreases an asset.
•Cash Basis Accounting- Revenue is reported only when cash is received, and expenses are
reported when cash is paid out.
•Accrual Basis Accounting- Money is accounted for before it is received.
•Financial Statement- Written records that convey the financial activities of a company.

8. References
1.Hayes, Adam (Feb 22nd, 2024), Total Debt-to-Total Assets Ratio: Meaning, Formula, and What’s Good. https://www.investopedia.com/terms/t/
totaldebttototalassets.asp
2. Hargrave, Marshall (Jan 28, 2024), Return on Assets (ROA): Formula and ‘Good’ ROA Defined. https://www.investopedia.com/terms/r/
returnonassets.asp#:~:text=ROA%20is%20calculated%20by%20dividing%20a%20firm's%20net%20income%20by,found%20on%20its%20balance%20sheet.
3. Fernando, Jason(Jan 26,2024), Return on Equity (ROE) Calculation and What it Means. https://www.investopedia.com/terms/r/
returnonequity.asp#:~:text=ROE%20is%20a%20gauge%20of,the%20value%20of%20shareholders'%20equity.
4. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/roe.html
5. https://finance.yahoo.com/news/live-nation-entertainment-inc-nyse-170735401.html#
6. Fernando, Jason(Jan 31, 2024), Balance Sheet: Explanation, Components and Examples https://www.investopedia.com/terms/b/balancesheet.asp
7. Murphy B., Chris (Feb 29, 2024), Cash Flow Statement: What it is and Examples https://www.investopedia.com/investing/what-is-a-cash-flow-statement/
8. Fernando, Jason(Mar 5, 2024), Profit and Loss Statement Meaning, Importance, Types and Examples https://www.investopedia.com/terms/p/plstatement.asp
9. Moral, Chizoba (Nov 28, 2023), Accrual Accounting vs. Cash Basis Accounting: What’s the Difference?. https://www.investopedia.com/ask/answers/09/accrual-
accounting.asp#:~:text=Under this method, revenue is reported on the income statement,businesses and for personal finances.
10. Murphy B., Chris (Feb 2, 2024), Financial Statements: Lists of Types and How to Read Them. https://www.investopedia.com/terms/f/financial-statements.asp