Reference no: EM132550389

Your SEC 10-K company communicates their philosophy and financing strategy on the balance sheet through reporting of assets and liabilities. First, what is Working Capital? It is calculated as:

Current Assets - Current Liabilities = Working Capital

Working capital (WC) may be negative if current liabilities (CL) exceed current assets (CA). If this occurs, what does this indicate about the corporation's financial position? Is this a cause for concern? How does your SEC 10-K company address this issue? Do they discuss strategy for overcoming a negative working capital?

The basic accounting equation is: Assets - Liabilities = Owners' Equity. This basic equation is illustrated by reporting assets, liabilities and owner's equity on the balance sheet. If owner's equity is positive, this is a favorable position. For some companies, especially if they recently recapitalized with debt, there may be negative equity. Discuss your corporation's financial position reported on the balance sheet.
Consider the classified balance sheet. What is a classified balance sheet? How is a classified balance sheet different from a more traditional balance sheet format that lists all assets and liabilities as one total. What is the benefit of creating subtotals within assets and within liabilities to separate current from non-current?

After addressing the above topics, additional topics you can incorporate into your weekly homework assignment:

Question 1: Why do companies need to value their accounts receivable at the end of each accounting period?

Question 2: Discuss the differences between the inventory accounting methods (LIFO, FIFO, Weighted Average, Specific Identification). Do these inventory methods reflect the actual flow of inventory?