Accounting Horizons Vol. 24, No. 3 2010 pp. 471–485 American Accounting Association DOI: 10.2308/acch.2010.24.3.471 COMMENTARY A Framework for Financial Reporting Standards: Issues and a Suggested Model American Accounting Association’s Financial Accounting Standards Committee (AAA FASC) James A. Ohlson, Stephen Penman, Robert Bloomfield, Theodore E. Christensen, Robert Colson, Karim Jamal, Stephen Moehrle, Gary Previts, Thomas Stober, Shyam Sunder, and Ross L. Watts SYNOPSIS:
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Financial Statements and Cash Flow 2 LO 1 LO 2 LO 3 LO 4 Financial Statements, Taxes, and Cash Flow W hen a company announces a “write-off,” it frequently means that the value of the company’s assets has declined. AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO: Differentiate between accounting value (or “book” value) and market value. Distinguish accounting income from cash flow. Explain the difference between average and marginal tax rates. Determine a firm’s cash flow from its financial
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1. Investors use the information to assess whether or not they want to put money into the company. Equity investors look for an indication of stability and the potential growth. Debt investors are concerned with the firm's ability to generate cash to make interest .Vendors who supply the firm on credit look for its ability to pay its bills in the short term. Management uses financial information to pinpoint problem areas for improvement in operations. 2. Financial information about
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Interpretation of Statement of Cash Flows Cash Flows from Operating Activities Net Income/Loss: Cash flow from operating activities is positively affected by accrual profit and affected negatively by losses. “Add-backs” to Net Income: Depreciation and Amortization: Expenses from depreciation and amortization are added back to net income when calculating operating cash flow. Such expenses are classified as “non-cash items or expenses” because companies do not “cut checks” for these expenses
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Beta measures the systematic risk of a security or a portfolio in contrast to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected returns of an asset based on its beta and expected market returns. Beta is calculated using regression analysis, it can be viewed as the trend of a security's returns to respond to movement in the market. A beta of 1 indicates that the security's price will move with the market. A beta less than 1 indicates
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types of businesses: Three types of business organizations---advantages and disadvantages of each type of organization; Rules of debits and credits; classification of accounts; what an account is; what a journal is; what a ledger is; what a chart of account is; Normal balances of each type of account; increase and decrease side of each type of account Accrual basis and cash basis accounting Current assets, long-term or fixed assets: current liabilities and long-term liabilities; 4 basic financial
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Executive Summary Non-Bank Financial Institutions (NBFIs) play a significant role in meeting the diverse financial need of various sectors of an economy and thus contribute to the economic development of the country as well as to the deepening of the country’s financial system. According to Goldsmith (1969), financial development in a country starts with the development of banking institutions. As the development process proceeds, NBFIs become prominent alongside the banking sector. The major
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|2.79 |2.15 | |2.2 | |Quick ratio |2.39 |1.64 | |1.1 | |Cash flow liquidity ratio* |3.27 |2.42 | | | |Average collection period |25 days |28 days | |53 days
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selling additional shares of stock. Agency problems are the differences between the goals of managers and shareholders where managers sometimes act in their self interest when they act as the agent of the corporation. Corporate governance is a set of rules that control the company’s behavior towards its managers, employees, shareholders. d) The primary objective of managers should be shareholder wealth maximization. a. Firms have responsibilities to society at large because shareholders are
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to examine a company’s operations and the market in which the company is operating to understand the stability and growth potential of that company. Company factors to examine include the dividends that company issues, the way a company manages its cash, the amount of debt a company has, and the growth of a company's costs and income. Fundamental analysis adherents believe a company’s “intrinsic value” will be eventually be reflected in the stock price through market forces, but that, while the market
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