Essay on Financial Accounting

This paper seeks the locate the Balance Sheet, Income Statement and Statement of Cash Flows from the 2007 annual reports of Amazon and Dell respectively and describe the general organization of each of the three sets of financial statements. This will be followed by a determination of whether net income or cash from operating activities which is more useful in the organization for each of the two companies. The last part requires to make one prediction about each company from that company’s financial statements and to reach one additional conclusion about each company from the additional information that may be found in their annual reports.

The required financial statements were indeed found from the two companies. For Amazon, the general organization of each of the three sets of financial statements is as follows: The Statement of Cash Flows was presented first, followed by the Income Statement (or Statement of Operations) and then by the Balance Sheet (Amazon, 2007). Since the Statement of Cash Flows came ahead than the Income Statement, it follows that cash from operating activities is more useful than income for the organization.

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For Dell, on the other hand, the general organization of each of the three sets of financial statements is as follows: The Balance Sheet was presented first, followed by Income Statement and then by the Statement of the Cash Flows. The more useful for Dell, is the opposite with the case of Amazon, as this time, net income is more important than cash from operating activities because Income Statement came ahead of the Statement of Cash Flows (Dell, 2007).

For Amazon, it could be predicted the revenues will grow 39% while total assets to grow by 49% in 2008 based on the Income Statement and Balance Sheet revenues figures for 2007 and 2006. For Dell, it could be predicted the sales will grow by 6% while total assets to grow by 8% based also on historical financial statement figures See Appendix 1. One additional conclusion that could be made for Dell will continue to have higher profitability that Amazon for the year 2008 in terms of return on sales and return on assets in 2007 for both companies. See Appendix 1.

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