Response to Comments on DQ1 C and DQ2 KSmith,Wk3 Essay

Response to Comments on DQ1 C and DQ2 KSmith,Wk3 - Essay Example You mentioned that the annual report is the most important report prepared by corporations for the shareholders and other stakeholders. I agree that the annual report is the most informative corporate statement since it provides valuable information about the business, its finances, and the strategic goals of the enterprise. Learning the basics about financial statements can help investors make better investing decisions. DQ2 The use of a classification system in the balance sheet is very useful because it creates consistency between statements. Investors can utilize the information contained in the classified balance sheet to perform quantitative financial analysis such as ratio analysis, variance analysis, or sensitivity analysis. The list of assets included in the classified balance sheet is ordered from top to bottom with the top accounts representing the most liquid ones. The most liquid financial asset is cash (Investopedia, 2011). When I answered this question originally I als o could not think of any additional classification that could add value to the classified balance sheet. The balance sheet internal structure follows the logic of the basic accounting equation which states that assets equals liabilities plus stockholder’s equity. The format used in the classified balance sheet is very easy to understand which makes it easier for teachers to teach accounting students.