Critical Thinking Chapter 19

1. The two parts of the stockholder's equity are equity contributed by stockholders and equity earned through business profits.
2. Gross profit on sales is found by subtracting the cost of merchandise sold from net sales. Operating income is the excess of gross profit over operating expenses.
3. The statement of retained earnings is a something that reports the changes in the Retained Earnings account during the period. The statement of cash flows reports how the activities of a business caused the cash balance to change during the accounting period.
4. The percentages on comparative income statements and balance sheets add vital information for analysis by allowing them to see the change from the beginning of he period to the end.
5. All four statements must be examined thoroughly to obtain an accurate understanding of a corporation's financial condition because each statement shows the financial standings of the company. If one of the statements if wrong or off, it messes up all the rest of the statements that's why they must be checked thoroughly.

"gross profit calculation." Docstoc.com. N.p., n.d. Web. 15 May 2014. <http://www.docstoc.com/docs/2778967/gross-profit-calculation>.