Accountants focus on creating financial statements, whereas finance professionals use these statements to evaluate a firm and answer questions about its performance. Indicate which financial statement you would refer to when answering the questions in the following table: Income Statement Statement of Retained Earnings How profitable has the firm been? How much of the firm's earnings are left as balance after the firm pays out dividends to its shareholders? If compensation for senior management is based on short-term performance of the firm, in the short run the firm is likely to: O Overstate its earnings o Understate its earnings The following table lists descriptions of the major financial statements and reports that a firm publishes. Identify the correct statement or report for each description. Statement or Report Description Is required by the SEC and includes the audited document that shows the company's financial results for the past year and management's discussion about the future outlook and plans Details changes in the capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings Has three segments that when analyzed together give an idea of what the company owns and what it owes Aggregates all cash inflows, which the company receives from its ongoing activities and investment sources, and all cash outflows Gives details about the firm's sales, costs, and profits for the past accounting period 2. Stockholders' equity Aa Aa E The right side of the balance sheet shows the firm's liabilities and stockholders' equity. Which of the following best describes shareholders' equity? O O Equity is the difference between the company's assets and liabilities. Equity is the initial claim on value of the assets before the firm pays off its liabilities. NOW Inc. released its annual results and financial statements. Grace is reading the summary in the business pages of today's paper. In its annual report this year, NOW Inc. reported a net income of $192 million. Last year, the company reported a retained earnings balance of $459 million, whereas this year it increased to $540 million. How much was paid out in dividends this year? O 0 $3 million $560 million $111 million $273 million

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