Study Guide Chapter 3: KCQ's

Key concepts:

·         The beginning (the quote from the Great Gatsby) kind of confused me, and made me think - what does this have to do with introducing financial statements? After reading through the whole chapter and going back to the quote – I was still a little confused about the relevance.

·         While going through my firm’s annual report - the different names of the balance sheets did really confuse me, mostly getting confused between the difference of a normal and a consolidated balance sheet. However throughout the course I began to understand the difference between the two – that one is a parent company, and the consolidated is the group.

·         Learning and reading about the definitions of the balance sheet, and what it specifically shows, helped me gain more understanding on not only this assignment, but accounting in general. I also learned the definition of present value which was a term I had been confused out during the course for a while. I found reading the sections on cash flow and dividends quite confusing, and no matter how many times I read it I didn’t seem to get the concept of it.

·         I agree with the fact that we better understand something when we can connect prior knowledge to it, as I find I can connect and relate myself to the situation and therefore really understand the meaning behind it – like most of us would.

·         “The focus of our analysis of our firm’s financial statements should be on understanding the

connections and relationships between key elements of the financial statements and the key drivers of the economic and business realities of a firm.” Reading this in the chapter helped me gain an insight of what exactly this assignment is about, and how I can help myself understand more what my firm is really about, and how they operate.

·         I was surprised to hear that the financial statements are really just a marketing document, although when I think twice about it, it’s really not too surprising.

·         'Business is not about sitting still on the sidelines.' This is an accurate description of the way I have always perceived business life to be like. I have always pictured it as a lot of work, a lot of constant change, almost like you get no free time at all! But despite this, it doesn’t change my interest in going into the business industry.

·         I'm not going to lie, I'm still trying to get a grasp and understanding of the terms revenue, expenses, assets, liabilities, credits, etc. However reading the footnotes on my firm’s balance sheet did assist me in gaining more of an understanding of what some of these confusing terms meant.

Key Questions:

·         What subsidiary companies does China Lilang own?

·         What is the definition of economic entity?

·         What is ratio analysis?

·         Why would a company not have any party owned subsidiaries?