Master of International Business Full Time

Financial Management Lecturer: Mayra Mas

Session 1

Financial Management Statements

Basic Financial Statements Basic Financial

Session 1
2

Relationship between Finance, Economics and Accounting
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Economics provides a broad picture of the economic environment for decision making in many important areas. Accounting, the language of finance, provides financial data through:
 Income

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statements sheets

 Balance

 Statement

of cash flows

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Finance links economic theory with the numbers of accounting

Types of Accounting
1.

Financial Accounting • Provides information primarily to people outside the company
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Provides information that would be helpful in attracting capital
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Equity and debt (useful in debt contracts) Credit from suppliers Customers Employees

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Provides information helpful in monitoring and evaluating management performance
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Types of Accounting
2. Managerial Accounting ◦ Provides information to people inside the company  Internal investment decisions  Performance evaluation

3. Tax Accounting
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Provides information to the tax authorities

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Firms will (generally) maintain separate books for tax and financial purposes

Basic Financial Statements
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Income Statement
Statement of Retained Earnings (a short supplement to the income statement) Balance Sheet Statement of Cash Flows

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Introduction to Financial Statements
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The Income Statement shows our revenues (income) and expenses. The Balance Sheet is a listing of all asset, liability, and equity account balances that do not appear on the income statement. It shows a company’s financial position at a specific date. (End of accounting period)

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The Statement of Cash Flows shows where the company gets and spends its cash.

Income Statement