ACC 640 - Milestone Two: Risk Assessments. Essay.

Risk Assessments It is said that the eyes are the windows to the soul. If that is true, then the financial statements are the windows to the company’s soul. Whenever you analyze the performance of a company, you will have to look at the financial statements and conduct risk assessments to determine if the company in question is performing well and is financial healthy. Income Statement Risk Analysis The income statement is a detailed overview of income sources of a company. When looking at financial risk, risk can be classified into three categories: High, Medium, and Low. A high categorization can indicate that the category should be closely monitored; it could have repercussions among other categories. A low category shouldn’t be taken too seriously, but should be checked on. Here are examples from Kroger’s income statement and the categories I believe they fall into: Risk Assessment Source Classification Sales: $109.83 Billion in FY16, 108.465bn in FY15, $98.375bn in FY14 HIGH Merchandise Cost: $85.496 Billion in FY16, $85.512bn in FY15, $78.138bn in FY14 MEDIUM G&A Expenses: $17.946 billion in FY16, 17.161 bn in FY15, and $15.196bn in FY14 LOW Source: M Sales should be considered high risk since that is the life source of the company. With sales, you have no income. If sales start to drop or come in under expectations, then it may be warranted to reconsider some other budgetary expenses like the amount of inventory bought or produced or labor. Merchandise costs is the cost of selling your product. For Kroger, they are buying food from wholesalers or other individuals to resale to its customers with a markup. If