Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following best describes how debt can create financial risk and instability for a company?

Debt always leads to higher profits because of tax benefits.

Debt increases a company's fixed obligations, making it harder to meet payments during periods of low income.

Debt eliminates the need for equity financing and reduces overall risk.

Debt has no impact on a company's financial stability as long as assets exceed liabilities.

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Verified step by step guidance

Understand the concept of debt in financial accounting: Debt refers to borrowed funds that a company must repay, often with interest. It creates fixed obligations, such as interest payments and principal repayment, which must be met regardless of the company's income levels.

Analyze the impact of debt on financial risk: Debt increases financial risk because it creates fixed obligations that the company must fulfill. If the company experiences periods of low income or financial instability, meeting these obligations can become challenging, potentially leading to default or bankruptcy.

Evaluate the tax benefits of debt: While debt can provide tax benefits (e.g., interest payments are tax-deductible), these benefits do not guarantee higher profits. The financial risk associated with fixed obligations often outweighs the tax advantages during periods of low income.

Compare debt financing to equity financing: Debt financing does not eliminate the need for equity financing. Instead, it complements equity financing but increases financial risk due to fixed repayment obligations. Equity financing, on the other hand, does not require fixed payments and provides more flexibility during financial downturns.

Assess the relationship between debt and financial stability: Debt impacts a company's financial stability regardless of whether assets exceed liabilities. High levels of debt can strain cash flow and increase the risk of insolvency, especially during economic downturns or periods of low revenue.