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1. What is meant by solvency? What information in the balance sheet can be used to assess a company’s solvency. If you were investing in a company, what information on solvency would be most important to you.. Provide support for your rationale.
2. Identify another limitation of the balance sheet and explain how companies could overcome the limitation.
3. Define and compare financial flexibility to liquidity and solvency and in your opinion identify which of the three is most important to creditors. Provide support for your rationale.
4. What are the major advantages of notes to the financial statements? Prior to investing in a company, what types of information would you look for in notes to the financial statements?
5. What is the objective of segment reporting and explain how this information is beneficial to investors and creditors
6. Explain related party transactions, and how the transactions should be disclosed in the financial statements.