ADM 2342 Chapter 4: Accounting Chapter 4

• School: University of Ottawa
• Department: Administration
• Course: ADM 2342
• Professor: Robert Collier

Document Summary

I(cid:374)(cid:272)o(cid:373)e state(cid:373)e(cid:374)t: is the (cid:396)epo(cid:396)t that (cid:373)easu(cid:396)es the su(cid:272)(cid:272)ess of a (cid:272)o(cid:373)pa(cid:374)(cid:455)"s operations for a specific time period. Income statements are different, due to underlying: business models and industries: Financing: obtaining cash funding, often by borrowing, issuing shares, or retaining profits. Investing: using the funding to buy assets and invest in people. Operating: using the assets to earn profits. In performing these three types of activities, companies are exposed to different levels of risk and are given different opportunities. Pizza shop risks are ingredient freshness or not sufficient cash flows while multinational companies face lawsuits due to pollution, fraud (a lot of employees), workplaces accidents and etc. Risk management: identifying risks, deciding if and how to manage risks and monitoring risks. Techniques: educating employees, buying insurance and installing safety equipment. **risk/return trade-off: market demands a greater return when there is a greater risk. Companies must make decisions about which opportunities to take and when.