Sportsco investments financing activity

study objectives

After studying this chapter, you should be able to:

1 Describe the primary forms of business organization.

2 Identify the users and uses of accounting information.

3 Explain the three principal types of business activity.

4 Describe the content and purpose of each of the financial statements.

5 Explain the meaning of assets, liabilities, and stockholders’ equity, and state the basic accounting equation.

6 Describe the components that supplement the financial statements in an annual report.

chapter

INTRODUCTION TO FINANCIAL STATEMENTS

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2 The Navigator is a learning system designed to prompt you to use the learning aids in the chapter and to set priorities as you study.

● Scan Study Objectives

● Read Feature Story

● Scan Preview

● Read Text and Answer p. 5 p. 11 p. 18 p. 20

● Work Using the Decision Toolkit

● Review Summary of Study Objectives

● Work Comprehensive p. 23

● Answer Self-Test Questions

● Complete Assignments

● Go to WileyPLUS for practice and tutorials

● Read A Look at IFRS p. 42

● the navigator

Do it!

Do it!

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Many students who take this course do not plan to be accountants. If you are in that group, you might be thinking, “If I’m not going to be an accountant, why do I need to know accounting?” In response, consider this quote from Harold Geneen, the former chairman of IT&T: “To be good at your business, you have to know the numbers—cold.” Success in any business comes back to the numbers. You will rely on them to make decisions, and man- agers will use them to evaluate your performance. That is true whether your job involves marketing, production, management, or information systems.

In business, accounting and financial statements are the means for communicating the numbers. If you don’t know how to read financial statements, you can’t really know your business.

Many companies spend significant resources teaching their employees basic accounting so that they can read financial statements and understand how their actions affect the company’s financial results. One such company is Springfield ReManufacturing Corporation (SRC). When Jack Stack and 11 other managers purchased SRC for 10 cents a share, it was a failing division of International Harvester. Jack’s 119 employees were counting on him for their liveli- hood. He decided that for the company to survive, every employee needed to think like a businessperson and to act like an owner. To accomplish this, all em- ployees at SRC took basic accounting courses and participated in weekly reviews of the company’s finan- cial statements. SRC survived, and eventually thrived. To this day, every employee (now numbering more than 1,000) undergoes this same training.