Question 4-1
Why should we bother restating a firm’s financial statements? What benefit could there be in simply re-arranging the elements of a firm’s financial statements?
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Question 4-2
Why is clearly separating a firm’s operating and financial activities a ‘powerful way of viewing a firm’? What is the difference between a firm’s operating and financial activities? Why is this difference so fundamental that there is benefit in considering each quite separately?
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Question 4-3
What aspects of a firm’s financial statements drive its return on net operating assets (RNOA)?
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Question 4-4
Which aspects that you identified in your answer to Question 4–3 above do you think are the most important? What, in turn, drives these accounting drivers of a firm’s financial performance? When analysing a firm’s financial statements, what do you think we should focus on and why?
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