Post on 27-Dec-2015
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Accounting
An information system that provides reports about the economic activities of an individual, family, organization, or other entity
Functions of Accounting
To summarize the financial performance of the firm (financial accounting)
Used to guide internal management in making decisions about the direction of the firm through relevant and timely information (managerial accounting)
Used to help determine the taxes to be paid (tax accounting)
Financial Reporting
Securities and Exchange Commission a government agency responsible for the
regulation of the stock markets and financial statement disclosures of companies
Reports and Statements Annual/Quarterly report 10-K - SEC required disclosure report Balance sheet Income Statement Statement of Cash Flows
Balance Sheet
Assets = Liabilities + Owner’s Equity
Assets-physical items or rights that have value and are owned by the company
Liabilities-claims of all creditors Owner’s Equity-Owner’s claims on the
company
Assets
Must meet four conditions will result in future benefits can be estimated in money terms is a result of a past transaction is owned by the enterprise
Cash & Marketable Securities Accounts Receivable Inventory Property, Plant & Equipment
Liabilities
Must meet four conditions will result in future sacrifices can be estimated in money terms are the result of a past transaction are owned by the enterprise
Accounts Payable & Accrued Expenses Long Term Liabilities
Income Statement
+ Revenues- Cost of Goods Sold- Operating Expenses= Income- Income Taxes= Net Income
Statement of Cash Flows
Cash flows from operations Cash flows from financing Cash flows from investments
Management Accounting
Costs - payments of cash or other assets in return for a benefit. Direct & indirect material Direct & indirect labor Factory overhead
Product costs vs Period costs Fixed costs vs Variable costs
Segment Profit Analysis
Determine the profit contributed by various market segments geographic, product, gender, etc.
Contribution margin sales less the variable costs
Contribution margin ratio contribution margin / sales
Tax Accounting
To pay the lowest amount of taxes possible in a legal manner. Following the rules of the Internal Revenue Service.
Finance
The study of how to manage assets and obtain funds to meet a company’s long-term business goals.
Areas of Finance
Financial markets - mechanisms for bringing together those who have money to invest with those who need funds.
Financial institutions - collects funds from savers and lends them to or invests them in business or people that need cash.
Financial management - how an organization should manage its assets, liabilities, and equity to produce a good or service.
Financial Markets
Functions matching savers and users of funds liquidity diversification sending signals and information
Expected returns and interest rates Nominal risk-free rate of return Risk
Types of Financial Markets
Money and capital marketstreasury billscommercial papernegotiable certificates of deposit
Primary and secondary markets initial public offeringsorganized exchanges - NYSE, AMEXover-the-counter - NASDAQ
Financial Institutions
Depository institutions Contractual savings institutions Investment institutions Venture capital Market-financed intermediaries Factors
Financial Management
Capital Budgeting Capital Structure Net working capital
Current Assets
Fixed Assets
Current Liabilities
Long-term Debt
Equity
OperatingDecisions
OperatingDecisions
CapitalStructureDecisions
CapitalBudgetingDecisions
Total Assets = Total Liabilities + Equity
Financial Positions
Treasurer the financial officer who oversees the traditional functions of financial analysis,
capital budgeting, short-term and long-term financing decisions and current asset management
Controller the individual who manages accounting, cost analysis and tax planning
Financial Analyst a staff member who diagnoses the effects of management proposals or
decisions on the financial health of a company
Securities Analyst a financial analyst who examines the stock prices of companies in a given
industry and makes recommendations to clients as to whether the price is too low or too high.
Value of a Firm
Shareholder wealth Market value of a firm’s common stock stock price * number of shares outstanding
Market value added market value of stock + market value of debt
- book value of stock - book value of debt