Assignment 2: Discussion—Understanding Financial Statements

In this assignment, you will learn to read and interpret financial  statements. Understanding the four financial statements provided in the  lectures and reading for this week and dealing with a company’s  financial performance is critical to making decisions about its  management and its relation to the global economy and financial markets.


  • Put the following income statement and balance sheet terms (general  ledger accounts) in the proper order for properly prepared financial  statements:
    Taxes, interest, gross profit, selling, general and  administrative expenses, sales, depreciation, net income, cost of goods  sold, EBITDA.
  • Put the following balance sheet terms (general ledger accounts) in  the appropriate category as either short-term assets, long-term assets,  short-term liabilities, long-term liabilities, and/or owner's equity for  properly prepared financial statements:
  • Cash, accounts payable, accruals, property, plant and equipment,  inventory, accounts receivables, paid in capital, retained earnings,  notes payable, mortgage, accounts payable.
  • In terms of McGladrey and Pullen’s Reading & understanding financial statements: A guide to financial reporting, explain the balance sheet equation in 300 words or less. Incorporate this explanation into your complete initial post.

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