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A13 Week3LectureNotes.pdf

by: Victoria Carr

A13 Week3LectureNotes.pdf BUS-A312

Marketplace > Indiana University > Accounting > BUS-A312 > A13 Week3LectureNotes pdf
Victoria Carr
GPA 3.2
Intermediate Accounting II
Salman Arif

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About this Document

Intermediate Accounting II
Salman Arif
Class Notes
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This 3 page Class Notes was uploaded by Victoria Carr on Thursday January 29, 2015. The Class Notes belongs to BUS-A312 at Indiana University taught by Salman Arif in Winter2015. Since its upload, it has received 155 views. For similar materials see Intermediate Accounting II in Accounting at Indiana University.


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Date Created: 01/29/15
Ratio Analysis Slides 12615 Slide 2 o This type of graphic makes an investor happy but is it really true 0 Slide 5 Return on Assets 0 Increase in Asset Base Assets grew more than Net Income causing a decline I That decline was in Total Asset Turnover Ratio as shown on slide 7 0 Slide 14 Leverage 0 Cost of Debt is lower than RCA and the ROE is benefitting from that Slide 15 0 Know before calculating that it should be less than 963 Slide 17 How are they really doing 0 Moral don t always believe the managers on the 10k because they are going to try to make themselves look as good as possible Slide 21 0 Different than the examples we did in class because there was growth so when there is growth you need to discount it using rg and raising it to the period 1 Slide 24 Price Reactions to Earning 0 Means that either hedge funds do a lot of research prior to predict the earning or there is insider trading Slide 25 0 Strong Form can t predict because all the information is known and factored in 0 Hedge Funds take the public accounting information and try to get what going on behind the scenes Slide 27 o This is over a much longer time period than the Reactions to Earning graph but this shows that the market is not either semistrong of strong because it still goes in a direction after earnings are announced Slide 28 0 Value stock is stock in a company that is established and considered to be boring Slide 30 o The actual is different from the expected because if the company you are managing is right on the edge you are going to do all you can to push themselves into the positive 0 Expected outcome looks like a normal curve Slide 33 Downward Earnings Management 0 Also happens before managers release stock options so that they will be able to buy the options at a lower price and sell it high when the real information comes out o Filling the cookie jar taking a massive los in this year to show a high profit and change in the following year Slide 35 0 Conceptual Framework is considered the Bible of Accounting Slide 37 In uences o All in uences have differing opinions and that makes it really difficult to set standards Ian 28 Debt Financing Slides Slide 3 0 PV 994741 0 I 10 N 3 PMT 4000 Slide 5 0 At Inception Motor Vehicle 9947 Loan Payable 9947 0 At Payment Dates 4000 3 9947 2053 Slide 6 0 Interest Expense 9947 1 995 4000995 3005 9947 3005 6942 only reduce loan balance based on loan reduction Slide 8 Bonds 0 Loan pay off mixture of principal and interest payment 0 Bond only pay interest until maturity when you pay entire principal back I Issued by bigger companies and they are traded on the bond market Slide 9 Bond Indenture 0 Bond Holders protective measures 0 If they pay dividends then they are less likely for bond to be paid off Slide 11 0 Private Placement fewer people that qualify for this market so it is harder to trade them Slide 12 0 Zero Coupon investors buy at super discount with no coupon payments but you get a higher principal later I Risk is that if company fails you never got any from interest Slide 13 Type of Bonds 0 Important to know the different types 0 Callable bound would exercise this right if the interest rate decrease so that financing could be gotten at a better rate 0 Putable bond would exercise when interest rates increase because you can sell the bond back to the company at a higher rate then the market will buy it back Slide 15 Calculation of Bond Price 0 State rate of return coupon rate 0 Effective rate of interest discount rate when issues 0 Yield to Maturity actual discount rate bond is trading at currently in the market Slide 16 Stated Effective Rate 1 This will be issued at par 2 This will be issued at a discount a Low coupons but pay less up front 3 This will be issued at a premium a High coupon payments but pay more up front Slide 17 Bond Pricing o Expect the number to be smaller than 100000 0 Stated 9 lt Effective 12 PV 8895987 I6 PMT 4500 100000 045 N 10 FV 100000 0 Company is going to make the PV of the bond Slide 18 o Expect larger number 0 Stated 9 gt Effective 7 PV 10831661 I 35 PMT 4500 N 10 FV 100000 Slide 22 0 Those in white are investment grade bonds and are the best to have 0 Colored are the junk bonds Slide 23 0 Pending whether bond is bought at discount or premium is going to depend the journal entry and the side Slide 26 0 Bond Disc Balance Bond Disc Discount Amortized 0 CV of Bond CV Discount Amortized Slide 30 Bond Payable 10000 Cash 100000 Slide 31 o This will have the same journal entry and numbers every period 0 Must be told to use straight line otherwise assume it is amortized Slide 32 Bowie Company 0 Examples are same as the hand out and work and answers are posted to oncourse


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