Assessing Fiscal Years with Satellite Data

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Using the company's selected SIRIUS satellite and XM radio satellite, compare the company's 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
As discussed in the earlier response the 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.
For Sirius the figure is:
The Net income of the Sirius for the year 2006 is ($1,104,867,000). This figure is being added to the Retained earnings in the Balance Sheet making the total retained earnings in 2006 as ($3,833,720,000).
Similarly, the Net income of the XM Radio for the year 2006 is ($731,692,000). This figure is being added to the Retained earnings in the Balance Sheet making the total retained earnings in 2006 as ($3,498,476,000).
Cash flow statement as described in the previous responses to you uses data from the Income statement and the Balance sheet.
For example, the figure of the net income is taken as starting point in the cash flow statement. (See attached excel file)
Also, certain prepaid expenses, outstanding expenses, prepaid incomes and outstanding incomes also appear in balance sheet. Thus, Balance Sheet will not be complete without the Income statement as income statement provides vital date to Balance Sheet.
Thus when they are in combination, the income statement and balance sheet help interested parties measure a company's current financial performance and forecast its profit and cash flow potential. Also 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 finance growth. These have been taken from the balance sheet.

Many of the items on this statement are also found in either the income statement or the balance sheet, but here, they're arranged to highlight the cash that is generated and how it relates to reported earnings.

b. Briefly describe where the key components of the basic accounting equation are illustrated in the company financials.

The accounting equation is
Liabilities + Equity = Assets.

This tells that the sources of funds are equal to the application of the assets. This balance because of dual aspect concept. This means that every business transaction has a dual aspect as every transaction affects at least two accounts.
If the equation is not balancing, then it indicates the error in recording. There must be some mistake in entering the transaction into the accounting equation. Hence, there will be ...