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Inter-relationships, Accounting, and Financial Statements

Using the companies selected (Sirius and XM) for the Review of Financial Statements Paper, prepare a summary comparing the companies' two most recent fiscal years based upon the following:
a. Briefly discuss the inter-relationships noted among the data provided by each of the statements.
b. Briefly describe where the key components of the basic accounting equation are illustrated in the company financials.
c. Describe any control techniques or issues that were discussed in the company's financial statements.

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Using the companies selected SIRIUS satellite and XM radio satellite, compare the companies two most recent fiscal years based upon the following:

a. Briefly discuss the inter-relationships noted among the data provided by each of the statements.

Interrelationship
Financial statements are most important statements of accounting. Accountants summarize this information in a balance sheet, income statement, statement of stockholder's equity and statement of cash flows
The financial statements can be accessed through the following link. Also I have provided this in the attached excel file.

http://phx.corporate-ir.net/phoenix.zhtml?c=115922&p=irol-reportsAnnual
http://investor.sirius.com/downloads/2006AR.pdf
The statement of cash flows provides information about cash receipts and cash payments of an entity during a period. A secondary objective is to provide information about the operating investing and financing activities of the entity during the period.
We know a great deal about the company that is valuable by assessing its future cash flows. Income statement contains all the revenues and expenses and finally they determine the profitability of the organization. Income statement discloses the performance of the organization. It tells about the profitability of the organization. Thus financial statements are useful tools for evaluating both profitability and liquidity. Used separately, or in combination, the income statement, cash flow statement and balance sheet help interested parties to measure a company's current financial performance, and to forecast its profit and cash flow potential.

Balance sheet, tells about the assets and liabilities of business. It portrays the picture of the organization on a particular date. The balance sheet highlights the financial condition of a company at a single point in time. This is important; the cash flow and income statements record performance over a period of time, while the balance sheet is a snapshot in time. Income statement discloses the performance of the organization. It tells about the profitability of the organization.

Statement of Retained Earnings also known as "Statement of Owners' Equity" is one of the basic financial statements as per Generally Accepted Accounting Principles. This explains the changes in company's retained earnings over the reporting period. It breaks down changes affecting the account, such as profits or losses from operations, dividends paid, and any other items charged or credited to retained earnings. www.en.wikipedia.org/wiki/Statement_of_retained_earnings
Thus statement of the retained earnings communicated changes in the Stock holder's equity between the two years due to affect of profit, dividend or any other relevant item.

Interrelationship
Balance sheet, income statement, statement of retained earnings and statement of cash flows are derived from the same underlying financial information, they relate closely to each other. The data of one financial statement is used in preparing the other financial statements. Many of the values that are reflected in one statement generally find themselves in another. Even more so, there is a flow of information from one financial statement to another.
For example the Retained earnings calculated in the Income statement is used in Balance sheet and in the statement of the stockholder's equity.
Cash flow statement as described in the previous responses to you uses data from the Income statement and the Balance sheet.

Statement of the changes in the Stock holder's equity use data from the Income statement and the Balance sheet. Income statement uses the data from the previous balance sheet and the change in the current year.
The cash-flow statement tells much actual money the company has generated. Cash flow shows us how the company has performed in managing inflows and outflows of cash and provides a sharper picture of the company's ability to pay bills and creditors, and to ...

Solution Summary

This solution answers various questions regarding financial statements.

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