Week 2 Notes
Week 2 Notes BADM 3501
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This 2 page Class Notes was uploaded by Camille Duarte on Friday September 11, 2015. The Class Notes belongs to BADM 3501 at George Washington University taught by Mark Klock in Summer 2015. Since its upload, it has received 29 views. For similar materials see Financial Management and Markets in Business Administration at George Washington University.
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Date Created: 09/11/15
BADM 3501 98 09082015 Accounting and Finance The Balance Sheet 0 Financial statement that shows the value of the rm s assets and liabilities at a particular time from an accounting perspective 0 Flow variables are changes in stock variables 0 Current Assets Cash and securities receivables inventories Fixed Assets tangible assets intangible assets Current Liabilities Payables short term debt Long term liabilities Shareholders Equity 0 The commonsize balance sheet 0 All items in the balance sheet are expressed as a percentage of total assets Market Value vs Book Value 0 Book value value of assets or liabilities according to the balance sheet 0 Market value value of assets or liabilities were they to be resold in a market 0 Generally Accepted Accounting Principles GAAP procedures for preparing nancial statements 0 Equity and asset market values are usually higher than their book values The Income Statement 0 Financial statement that shows the revenues expenses and net income of a rm over a period of time from an accounting perspective 0 Earnings Before lncome amp Taxes EBlT o EBlT total revenues costs depreciation Pro ts vs Cash Flows Pro ts subtract depreciation a noncash expense Pro ts ignore cash expenditures on new capital the expense is capitalized Pro ts record income and expenses at the time of sales not when the cash exchanges actually occur Pro ts do not consider changes in working capital Statement of Cash Flows Statement that shows a rms cash receipts and cash payments over a period of time Free Cash Flows FCF cash available for distribution to investors after rm pays for new investments or additions to working capital o FCF net income interest depreciation additions to net working capital capital expenditures Accounting Practice 0 Revenue recognition Cookiejar reserves Lehman Brother s repurchase agreements Off balance sheet assets and liabilities Taxes 0 If you were both the debt and equity holders of the rm which would generate more cash ow to you Firm A EBIT 100 Interest 40 Pretax income 60 Taxes 35 21 net income 39 Firm B EBIT 100 Interest 0 Pretax Income 100 Taxes 35 35 net income 65 Firm A better choice government gets less amount of money Assets Liabilities Cash 10000 Accounts payable 17000 Accounts receivable 22000 Longterm debt 170000 Inventory 200000 Equity 145000 Store amp Property 100000 Total assets 332000 Net income 20 x M 2000 M1000 100008000 cost of goods sold 2000
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