Week 5 Reflection

Week Five Reflection Paper Team B will reflect on why it is important for management as well as institutionalizeors and creditors to understand the current and long-term liabilities. What makes it important to disclose contingencies as well as how do operating and capital leases relate to liabilities. It is important for managers to know what the company has as current or long-term liabilities because if they are not aware of what the funds note like they cannot affectively run the company. This knowledge helps a manager be more effective at planning and organizing what the companies priority are.Without taking time to learn this, managers could overdraft a companys bank account just trying to order supplies. External vendors would requisite to obtain this kind of information for a few reasons. One, investors who want to invest in your company they want to make sure they are making a very sound decision on their investment. Investors would not invest in a company if it was on the verge of filing for bankruptcy or going out of business. Creditor will also look at a companys current and long-term liabilities.If a business has too much or too little debit this could be a quality of not being stable. So for a creditor this would also a high risk if they did not take the time to do some research and crunching of the numbers pool to see where the business or individual stands. The importance of disclosing any contingencies is really to keep companies honest about how their business is doing. Per FASB disclosing of this information gives financial statement users the competency to understand the nature of a loss contingency, potential magnitude as well as if known the potential timing.With a capital lease the obligation relation would be equal, as you would list this lease on all financial statements, balance sheet, income statement as well as the cash give statement. With operating leases the effect would be listed on the income statement and the cash flow st atement but not the balance sheet. So team B has short reflected on the understanding of current and long-term liabilities, why is it important to disclose contingencies as well as how does operating and capital leases related to liabilities.