– Amount of money in bank. 1-4 Financial Accoun0ng Informa0on • For external users (investors) and managers. • Used by investors to make decisions to buy, sell, or hold shares of a company. • Annual report and its financial statements. – Common rules used so investors can compare with other companies’ financial statements. – No “tailor‐made” informa3on 1-5 Management Accoun0ng Informa0on • For internal users such as president, marke3ng manager, produc3on manager, etc. • Used for three management func3ons:
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Financials study - Opportunity 1 IFG is a large firm and has a suitable factory with offices, currently lying unused. The open market rental value is £1m per annum (Assume this is net cash income per year, with all other costs already been included, and there is no initial capital investment needed for IFG ). Cash flow calculation
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values of the following cash flow streams. The appropriate interest rate is 8% Year Cash Stream A Cash Stream B 1 $100 & nbsp; $300 2 400 400 3 400 400 4 400 400 5 300 100 PV for cash stream A = $1,251.29;
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value of an investment by the discounted sum of all cash flows received from a project. In this case this would be the calculation of the single project capital budgeting for Ocean Carriers Inc. and a purchase of 15 year operation vessel. This 15 year time span would begin in 2000 and continue until 2017. Ocean Carries Inc. in this scenario would be subject to the United States 35% taxation. In order to calculate the net present value the free cash flow had to be calculated. Using the formula; EBIAT
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that the cash flow for FY 2003 was $1,522,000. The bulk of the positive cash flow stems from cash earned from operations, which is a good sign for investors. It means that core operations are generating business and that there is enough money to buy new inventory. The purchasing of new equipment shows that the company has cash to invest in inventory for growth. Finally, the amount of cash available to the company should ease investors' minds regarding the notes payable, as cash is plentiful to cover
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the firm. Sometimes the firm has to choose between two or more projects and can only pick one. For example, you may have a choice between two air-conditioning systems with different installation costs and energy costs. Your decision to install one rules out the installation of the other. Both systems may be wealth improving but you can’t accept both. You want to pick the one that increases wealth by the most. When you have mutually exclusive projects,
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Finance 1. Three Questions: A. What Long-term asset should be invested? Capital Budgeting B. How to raise cash for capital expenditures? Capital Structure C. How to manage short-term cash flow? Net Working Capital 2. Capital Structure: Marketing Value of Firm = MV of Debt + MV of Equity 3. Finance perspect and Accountant perspect: Finance: Cash Flow ! Accountant: A/R means profit ! 4. Sole proprietorship, parternership and corporation | 5. The goal of financial
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Chapter 11: Reporting and Interpreting Stockholders’ Equity * Corporate Ownership * Shares of stock can be purchased in small amounts. * Ownership interests are transferable. * Stockholders are not liable for the corporation’s debts * Common stock – the basic voting stock issued by a corporation to stockholders. * Voting rights * Dividends * Residual claim – if the company ceases operations, stockholders share in any assets remaining after
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Procedure Cash Management Cash Management 1. DEFINITIONS............................................................................................................. 3 1.1. Cash Management ............................................................................................................................... 3 1.2. Cash Flow Analysis .....................................................................................................................
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‘When calculating variances, we in effect ignore differences of volume of output, between original budget and actual, by flexing the budget. If there were a volume difference, it is water under the bridge by the time that the variances come to be calculated’. Variance analysis typically involves the isolation of different causes for the variation in income and expenses over a given period from the budgeted standards. So for example, if direct wages had been budgeted to cost $100,000 actually
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