Questions and Answers

1. Discuss the differences and similarities of common stock, preferred stock, and treasury stock.  How is each issued by a company?

2. Assume that you are an investor interested in purchasing stock.  What are some ways you could find information on a company and its stock offerings?

3. Discuss the differences and similarities in issuing bonds and stocks.  What are the benefits to a company of issuing one over another?

4. As an investor, what are the pros and cons of investing in either?  Why would you choose one over the other?

5. Under what circumstances does a company prepare consolidated financial statements? Provide an example of a consolidated financial statement and a brief explanation of the parent company and its subsidiaries.

6.


Discuss the three primary activities on the Statement of Cash Flows.  Provide examples of activities for each category

7.


Discuss the difference between the direct and indirect method of reporting cash flows. Why is the indirect method used instead of the direct method for reporting?

8. Managerial decision making is based on controlling cost which is classified by five categories: behavior, traceability, controllability, relevance, and function.  Using these categories, provide examples of each and discuss the determining factor(s) to consider when deciding to assign a cost to products or services.