The importance of the above two statements

The information contained in these two financial statements becomes more important when it is compared with corresponding information for previous years, for competitors, and for the industry in which the firm operates. A number of financial ratios can also be computed from this information. These ratios provide a picture of the firm’s profitability, its short-term financial position, its activity in the area of accounts receivables and inventory, and its long-term debt financing. Like the information on the firm’s financial statements, the ratios can and should be compared with those of past accounting periods, those of competitors, and those representing the average of industry as a whole.

Answer the questions:

1. What is accounting? Give a short definition.
2. It is possible to manage a business operation without accurate and timely accounting information?
3. Who needs accounting information? Explain why.
4. What is the basis for accounting process?
5. State (изложите) the standard form of the accounting equation.
6. What is the balance sheet? Give a short definition.
7. What must a balance sheet show?
8. What is an income statement?
9. What can be computed from the information contained in a balance sheet and an income statement?
10. Do the ratios computed from this information provide a picture of a firm’s profitability and its financial position?
11. Is this information for competitors?