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Under Generally Accepted Accounting Principles (GAAP), Operating Leases are capitalized and shown on the balance sheet as both an asset and a liability. A firm with an aggressive accounts receivable collection effort and stringent credit terms and policies can reduce the probability of bad debt losses. Generally speaking, inventory represents the largest invest- ment in current assets for a manufacturing concern. The inventory level within a firm should be related to and support anticipated future levels of sales. A higher than normal level of inventory can result in excessive carrying costs (storage, insurance, taxes), risk of loss in value (due to deterioration and obsolescence), and larger than normal investment in inventory (opportunity loss to put these funds to more productive uses). An increase in a current asset account must be accompanied by a corresponding increase in a 11 ability account. Working capital is analogous to the firm's investment in total assets The greater the number of days in the Net Trade Cycle, the larger the investment in Net Working Capital and the slower the firm's cash flow. An investor will hold the stock of a firm for its dividend and/or potential capital appreciation. The statement of cash flows should be reviewed for several time periods in order to determine the major sources of cash and the major uses of cash. Issued shares are the maximum number of shares that a firm can offer for sale without amending the Corporate Charter. The capitalization of the firm consists of all equity plus all long term liabilities. This provides the foundation (permanent funds) for the firm. A company's pension plan has its own set of financial statements which is normally separate fron the financial statement of the compa Common Stock and Additional Paid in Capital (APIC) are externally introduced equity contributions by the stockholders of the firm. The separation between these two accounts is critical from the point of view of the actual financial analysis and the analytical techniques employed. 39. Preferred Stock is a hybrid security that is actually debt, though it possess many characteristics of equity. Under Generally Accepted Accounting Principles (GAAP), Operating Leases are capitalized and shown on the balance sheet as both an asset and a liability. A firm with an aggressive accounts receivable collection effort and stringent credit terms and policies can reduce the probability of bad debt losses. Generally speaking, inventory represents the largest invest- ment in current assets for a manufacturing concern. The inventory level within a firm should be related to and support anticipated future levels of sales. A higher than normal level of inventory can result in excessive carrying costs (storage, insurance, taxes), risk of loss in value (due to deterioration and obsolescence), and larger than normal investment in inventory (opportunity loss to put these funds to more productive uses). An increase in a current asset account must be accompanied by a corresponding increase in a 11 ability account. Working capital is analogous to the firm's investment in total assets The greater the number of days in the Net Trade Cycle, the larger the investment in Net Working Capital and the slower the firm's cash flow. An investor will hold the stock of a firm for its dividend and/or potential capital appreciation. The statement of cash flows should be reviewed for several time periods in order to determine the major sources of cash and the major uses of cash. Issued shares are the maximum number of shares that a firm can offer for sale without amending the Corporate Charter. The capitalization of the firm consists of all equity plus all long term liabilities. This provides the foundation (permanent funds) for the firm. A company's pension plan has its own set of financial statements which is normally separate fron the financial statement of the compa Common Stock and Additional Paid in Capital (APIC) are externally introduced equity contributions by the stockholders of the firm. The separation between these two accounts is critical from the point of view of the actual financial analysis and the analytical techniques employed. 39. Preferred Stock is a hybrid security that is actually debt, though it possess many characteristics of equity

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