Chapter 1 in our course text shows a set of financial statements for a hypothetical firm,...

Chapter 1 in our course text shows a set of financial statements for a hypothetical firm, Quartz Corporation. Suppose you have been approached with an offer to invest in shares of the firm. Based on the accounting information provided, would you invest? Why...or why not? Please explain in detail.

Walther, L. M. (2012). Principles of accounting. Utah State University.

that's exactly the way they ask me, I add it the book name they provide (it's free online)

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Expert Solution

So the basic question is whether one can invest in a company or an entitiy on the basis of accounting or financial information.

You cannot expect a straight Yes or No answer to this.

Before investing one has to consider and study so many factors. one among them and important one is the accoounting informations.Investment itself has so many risks associated with it. So we have to make a indepth study of the entity we are going to invest.What type of investment we aim for matters a lot. Like Long time time investment or short term investment. Coming to the factors to be noted or to be known before investment.

Accounting and financial information- These informatios helps to learn about the movement of the company , its growth in the recent past. Various data, with help of data analytics , can be used to ccompute various ratios which inturn shows the growth of the entity. There are so many ratios like Quick ratio, srock turnover ratio, Debt equity ratio ...etc which help an investor to decide whether he needs to invest with the company or not.
Management - The key persons in an entity like the CEO, CFO, managing director etc also plays a key role in deciding the investment. The backgroound study of these key persons helps us to learn more on their ability to the company.
Fundamental Analysis, technical Analysis and Valuation should be done properly before investing in a company

ekkarill92 answered 1 year ago

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