FIN 614: Financial Management Larry Schrenk, Instructor.

Slides:



Advertisements
Similar presentations
© Prentice-Hall of India Private Limited, All rights reserved.1 Financial Accounting: A Managerial Perspective Second Edition Prepared by R. Narayanaswamy.
Advertisements

ACCT 100 Chapter 3 Adjusting the Accounts Accrual Accounting and the Financial Statements 2 Objectives of the Chapter I.Introduce the accrual accounting.
Review of the Accounting Process INTERMEDIATE ACCOUNTING I CHAPTER 2 This presentation is under development.
Principles of Financial Accounting
1 (of 22) FIN 468: Intermediate Corporate Finance Topic 3–Capital Budgeting Larry Schrenk, Instructor.
© PHI Learning, All rights reserved.1 Financial Accounting: A Managerial Perspective Third Edition Prepared by R. Narayanaswamy Indian Institute.
Basic Accounting Principles
Fin Dr. Menahem Rosenberg1 Financial Statement  The Balance Sheet  The Income Statement  The Statement of Cash Flows  Accounting for Differences.
Presents: Demystifying Financial Statements Students to Start-Ups Entrepreneurial Skills Workshop Series By Jim Chamberlain Center for Entrepreneurship.
Ch. 2 Financial statement, Taxes and Cash flows. 1. Balance sheet Summarizing what a firm owns (assets) and what a firm owes (liabilities) Asset = Liability.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
Financial Statements (Ch 2 & 3) The Balance Sheet The Income Statement Taxes Free Cash Flow/Cash Flow From Assets Ratio Analysis Financial Statement (Ch2&3)
Annie’s Project January 30, 2007 Coweta Oklahoma
Income Measurement and Accrual Accounting
HFT 2403 Chapter 3 Accounting Adjustments. The Need for Adjustments The life of an enterprise is divided into equal segments of time The life of an enterprise.
1 Accrual Accounting and the Financial Statements Chapter 3.
Acct 310 Accounting Review Part II Rick Hayes, Ph.D., CPA California State University L.A.
Adjustments, Financial Statements, and the Quality of Earnings Chapter 4 McGraw-Hill/Irwin © 2009 The McGraw-Hill Companies, Inc.
FIN 614: Financial Management Larry Schrenk, Instructor.
June 27 Chapter 3. 1.Real (permanent) accounts are revenue, expense, and dividend accounts and are periodically closed. 2.Under International Financial.
Chapter 4 Income Measurement and Accrual Accounting
Income Statements Uses ▸ Summarize revenues and expenses ▸ Determining profit or loss ▸ Explaining changes in owner equity ▸ Supporting Loan Application.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
Recognition: formally recording an item in the financial statements of an entity Recognition and Measurement I know I need to record this... Measurement:
Acquiring and Organizing Management Information Chapter 3.
22-0 Incremental Cash Flows 22.4 After-tax lease payment (outflow) Lease payment*(1 – T) Lost depreciation tax shield (outflow) Depreciation * tax rate.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
Chapter 3. Differentiate between accrual and cash-basis accounting 2Copyright (c) 2009 Prentice Hall. All rights reserved.
DES Chapter 3 1 DES Chapter 3 Financial Statements and Free Cash Flow.
Circular Flow of Income Quick Quiz. What are the 3 injections to an economy? Investment Government spending Exports.
Plan for Today 1.Hand in case 2.Administration & Questions 3.Review of last class 4.Case: Tartempion: The incremental approach 5.Tax shields -- Capital.
FIN 614: Financial Management Larry Schrenk, Instructor.
Chapter 1 AN INTRODUCTION TO FINANCIAL MANAGEMENT – THE TIES THAT BIND “…although it is not necessary to understand finance in order to understand these.
Financial management: lecture 7 Free Cash Flows in Finance Calculate future cash flows.
HFT 2401 Exam 3 Review. Exam will cover: Chapter 8 – Cash & Internal Controls Chapter 9 – Receivables & Payables Chapter 10 – Inventory Chapter 11 – Assets.
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-1 Understanding Accounting and Financial Statements.
J0704-Business Plan Financial Pro Forma Session
AGEC 407 Record Keeping Why is record keeping important? –Measure profit and assess financial condition –Provide historical data for business analysis.
FIN 614: Financial Management Larry Schrenk, Instructor.
Financial Statements and Free Cash Flow 1. Cash is King! Investors care about cash flow. It is worth going to a lot of trouble to disentangle cash flow.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
Chapter 3 Accrual Accounting Concepts. Why is Accrual Accounting Needed? Cash received or paid Revenue earned Expense incurred.
Chapter 2 Financial Statements, Taxes, and Cash Flow.
FIN 614: Financial Management Larry Schrenk, Instructor.
FIN 614: Financial Management Larry Schrenk, Instructor.
Group 4 P9-5. A. Debit Credit Wages expense (+E, -SE) $3,600 Wages payable (+L)..………… $3,600 Wages payable (+L)..………… $3,600 Stockholders Stockholders.
REAL ESTATE Investments Vocabulary Rental Property – real estate available for being rented and an alternative to investment opportunities available.
Finance Chapter 2 Financial statements. Financial statements & reports  Annual report—a report issued once a year by a corporation to its stockholders,
FIN 614: Financial Management Larry Schrenk, Instructor.
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 3-1 CHAPTER 3 ADJUSTING THE ACCOUNTS Accounting Principles, Eighth Edition.
How to do Cash Flow Statements
Gary A. Porter and Curtis L. Norton
Video 4 (Topic 2.2.2): Perpetuities
The Accounting Cycle: Step 5
Lecture 1 Debtors OR Trade Debtors – are the receivables by the organization against the sale of goods. Receivables / Other Receivables – are all receivables.
FIN 422: Student Managed Investment Fund
الباب الرابع التحليل المالي وتقدير ربحية المشروع
הכרת דוחות כספיים ניתוח דוחות כספיים והערכת שווי – מצגת 1
Income Statement.
FIN 360: Corporate Finance
Presentation transcript:

FIN 614: Financial Management Larry Schrenk, Instructor

1.Two General Principles 1.Use Increments 2.Use Real Cash Flows

Principle One: Use Increments. The Incremental Approach to Cash Flow Analysis Principle Two: Use Real Cash Flows. Real versus Accounting Cash Flows

The Incremental Approach to Cash Flow Analysis Incremental: How real cash flows change Alternate: Averages

New Project Costs 2 Divisions Now, 3 After CostBeforeAfterAverageIncrement Furniture$10,000$12,000 Software $9,000 Insurance $4,000 $6,000

Average Approach CostBeforeAfterAverageIncrement Furniture$10,000$12,000 $4,000 Software $9,000 $3,000 Insurance $4,000 $6,000 $2,000

Incremental Approach change in costs, i.e., the increment, associated with the new project: CostBeforeAfterAverageIncrement Furniture$10,000$12,000 $4,000 $2,000 Software $9,000 $3,000 $0 Insurance $4,000 $6,000 $2,000

Conclusion: Use the increment CostBeforeAfterAverageIncrement Furniture$10,000$12,000 $4,000 $2,000 Software $9,000 $3,000 $0 Insurance $4,000 $6,000 $2,000

Real: Actual transfers of value at this time; Market values Money, assets, etc. Accrual Accounting May not be market values Goodwill, depreciation May not be current ‘accrued’, ‘payable’ NOTE: Possible ambiguity… Real versus Accounting Real versus Nominal

Payment of $6,000 for insurance over the next three years. AccountingReal

Accrual Accounting Cash Flow ‘Matching’ Profit AccountingReal $2,000

Real Cash Flow AccountingReal $2,000$6,000 $2,000$0 $2,000$0

A Complication Non-real cash flow has an effect on a real cash flow. Incorporate the effect, but not non-real cash flow itself. Depreciation

FIN 614: Financial Management Larry Schrenk, Instructor