Financial Statement Analysis

793 words - 4 pages

Financial Statement Analysis
ACC 561/PR
May 24, 2014

Financial Statement Analysis
A company owner or manager requires financial statements to improve their business or to make any important decision regarding their operations. Puerto Rico is a land that has many companies doing business, some are local or international. CVS Caremark Corporation is one of the main traded companies doing business here. This Corporation provides integrated pharmacy and health care services in United States and Puerto Rico (CVS 2014). CVS Caremark Corp. sells prescriptions drugs and over the counter but also provides a variety of products for everyday use, such as cosmetics, convenience foods among others. ...view middle of the document...

Under the accrual basis revenues are reported in the income statement when earned. Expenses are reported when they occur or expire. Considering the difference between the Cash Flow and an accrual basis, the accrual provides a better understanding of the business profits during and accounting period because the income statement is prepared based on the actual earnings of a business. This provides a better picture of the business profit in a certain point of time. Even though when both methods are used to keep track of business income and expenses, the idea is to analyze the advantages or disadvantages of each one.
Companies have measurement conventions recognized as authoritative to establish standards of financial accounting. The Financial Accounting Standard Board (FASB) and The International Standards Board (IASB) have been working together since 2002 to comply with the Accepted Accounting Principles (GAAP). GAAP is standards and conventions used in the United States to provide uniformity in accounting and financial statements (2014). The accrual method is approved by GAAP to used because is more accurate and mandatory for companies with sales of more than five million.
The Financial Accounting Standards Board (FASB) is the designated organization in the private sector for establishing standards of financial accounting that governs the preparation of financial reports by nongovernmental entities (2012). Their mission is to provide useful information to investors and other...

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