Module 2 Balance Sheet Of The Chief Executive Officer Of Bri ✓ Solved

Module 2 Balance Sheetthe Chief Executive Officer Of Bright

The Chief Executive Officer of Bright Road Health Care System wants to improve patient care survey results in the urgent care facilities within the Health Care System. The perceived quality of service is the lowest rated area on the survey. As a Change and Process Management consultant, you will work with the Director of Quality Improvement of the Health Care System to analyze the current structure, process, and outcomes of the urgent care facilities. Based on the information gathered, you will provide current quality improvement data and make recommendation for improvements. Module 3 - Case THE INCOME STATEMENT Assignment Overview The background material for this module explains and shows examples of income statements.

Pay attention to the layout and definitions of the income statement before reviewing the income statement for ABC Company shown below. Case Assignment Answer the questions below and explain your answer with numbers, computations, or a sentence or two.

1. Explain the term cost of sales in your own words. Is likely that the balance sheet of this company includes inventory?
2. Gross profit (margin) is a key piece of financial information. Why is it so important?
3. Explain operating expenses? What does the term mean?
4. Does ABC Company have any employees? Explain.
5. There is an error in the income statement. Property taxes are overstated by $10,000. How is the income statement affected by a correction of property taxes?
6. What happens to net income if the company hires a new manager at a salary of $80,000?
7. Does the company own any equipment? Is it informative to also check the balance sheet to answer this question? Explain.
8. Does the company have debt? How much debt? Explain how the income statement and balance sheet provide answers to the questions?
9. How do we know that ABC Company is using the accrual basis of accounting? Hint: Do not forget to look at the balance sheet from the prior module.
10. What happens to the income statement at the end of the period? Is it continuous or does it close (terminate)? Assignment Expectations Respond to all questions showing your computations and/or using your own words.

Paper For Above Instructions

The term "cost of sales" refers to the direct costs attributable to the production of the goods sold by a company. This includes the cost of materials and labor directly used to create the product. In the case of ABC Company, it is highly likely that the balance sheet includes inventory, as this is a common asset for companies that produce or sell physical products. The inventory represents the goods available for sale at the end of the accounting period, impacting the cost of sales calculation.

Gross profit margin is a critical financial metric because it measures the efficiency of a company in managing its production costs relative to its net sales. A higher gross profit margin indicates that a company retains more money from each dollar of sales to cover other expenses, while a lower margin may signal challenges in production efficiency or pricing strategies. A company like ABC can assess its gross profit margin to understand profitability, make pricing decisions, and manage operational costs effectively.

Operating expenses are the costs associated with running the day-to-day operations of a business that are not directly tied to production. These expenses include rent, utilities, salaries, and other administrative costs. Understanding operating expenses is essential for budgeting and managing profitability, as these costs can significantly carve into a company’s net income.

While the provided information does not explicitly confirm whether ABC Company has employees, it is reasonable to assume so, given that multiple operational functions typically require staff. An analysis of employment can be supported by looking at payroll expenses in the income statement, which would provide further clarity on employee-related costs.

If the property taxes are overstated by $10,000 in the income statement, correcting this error would reduce the total operating expenses and consequently increase the net income by the same amount. This adjustment reflects the importance of accuracy in financial reporting as it significantly affects the profitability projection of the company.

Furthermore, should the company decide to hire a new manager at a salary of $80,000, the entire income statement would reflect this as an increase in operating expenses, thereby reducing net income. The impact of such a hiring decision needs to be carefully weighed against the anticipated benefits brought by the new management.

Regarding equipment ownership, it is beneficial to investigate the balance sheet, as it provides valuable information about fixed assets, including equipment. This information allows stakeholders to assess the company’s capacity for production and the efficiency of its operations.

When analyzing debt, the balance sheet will indicate whether ABC Company has outstanding loans or liabilities. This information can clarify the financial leverage and overall risk exposure of the business. The income statement also helps illuminate the impact of interest payments on net income, leading to a comprehensive understanding of the company's financial health.

ABC Company is likely using the accrual basis of accounting because, under this approach, revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur. This accounting method leads to a more accurate reflection of the company’s financial status over a given period. A review of the previous balance sheet may reveal accounts receivable or payable, further supporting this conclusion.

Finally, the income statement operates on a period basis, meaning it does not carry over revenues and expenses from one period to the next. At the end of each accounting period, the income statement is closed out, and the net income or loss is transferred to the retained earnings section of the balance sheet, thereby terminating the statement for that specified period.

References

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• Cost Accounting Standards Board. (2022). Cost Accounting Standards. Government Publishing Office.
• Financial Accounting Standards Board. (2020). Concepts Statement No. 6. FASB.
• American Institute of Certified Public Accountants. (2021). Understanding the basics of accounting for non-accountants. Wiley.
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