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Financial Accounting in an Economic Context, 9th Edition by Jamie Pratt

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PART 3

Assets: A Closer Look

In a conference call with analysts, executives of Xerox Corporation discussed fourth quarter results, noting that earnings beat earlier estimates despite concerns about revenue levels. The company's CFO proudly reported, “Given the environment, we challenged our management teams around the world to manage cash as the number one priority. They did, and delivered cash from operations of almost $1 billion in the fourth quarter and $2.2 billion for the year versus a forecast of $1.7 billion. Achievements were where we wanted them to be, profit and working capital. Fourth quarter working capital improvements were $489 million and $758 million for the year. In addition, we managed CapEx [capital expenditures] to only $193 million for the year.”

The key to success for Xerox and many other companies is their ability to efficiently manage assets—that is, have relatively low investments in receivables, inventories, and long-lived assets that produce large returns for the shareholders. Well-run companies get a lot of “bang for their buck.” Part 3 of this textbook is devoted to managing and accounting for these assets.

CHAPTER 6

The Current Asset Classification, Cash, and Accounts Receivable

CHAPTER 7

Merchandise Inventory

CHAPTER 8

Investments in Equity Securities

CHAPTER 9

Long-Lived Assets

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