Then: Understanding Business:
1) As a potential investor in a firm or perhaps the buyer of a particular business, would it be advisable for you to evaluate the company’s financial statements? Why or why not? What key information would you seek from a firm’s financial statements?
2) Why must accounting reports be prepared according to specific procedures (GAAP)? Would it be a good idea to allow business some flexibility or creativity in preparing financial statements? Why or why not?
3) Go online and check the capitalization required to open a franchise of your choice. Like Chick Fil a. Does the franchisor offer financial assistance to prospective franchises? Evaluate the cost of the franchise versus its business potential using the risk/return trade off discussed in this chapter.
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1. As a potential buyer of a firm, it is advisable to evaluate the financial statements of a company. Because it will assist to identify the company's financial position and whether the company is performing well in terms of the financial aspects. And also this will show whether the company is generating a healthy return or whether that it has a going concern in its continuation.
There are several aspects and the items in the financial statement which my be very important to a potential buyer. Those are;
Sales: Analysis of sales is very important. Because sales is the main revenue generating line item...