1. Accounting for Decision Makers Dr. Richardus Eko Indrajit

2. Accounting  An information system that provides reports about the economic activities of an individual, family, organization, or other entity

3. Functions of Accounting  To summarize the financial performance of the firm (financial accounting)  Used to guide internal management in making decisions about the direction of the firm through relevant and timely information (managerial accounting)  Used to help determine the taxes to be paid (tax accounting)

4. Financial Reporting  Securities and Exchange Commission a government agency responsible for the regulation of the stock markets and financial statement disclosures of companies  Reports and Statements Annual/Quarterly report 10-K - SEC required disclosure report Balance sheet Income Statement Statement of Cash Flows

5. Balance Sheet  Assets = Liabilities + Owner’s Equity  Assets-physical items or rights that have value and are owned by the company  Liabilities-claims of all creditors  Owner’s Equity-Owner’s claims on the company

6. Assets  Must meet four conditions will result in future benefits can be estimated in money terms is a result of a past transaction is owned by the enterprise  Cash & Marketable Securities  Accounts Receivable  Inventory  Property, Plant & Equipment

7. Liabilities  Must meet four conditions will result in future sacrifices can be estimated in money terms are the result of a past transaction are owned by the enterprise  Accounts Payable & Accrued Expenses  Long Term Liabilities

8. Owner’s Equity  Same as Stock holder’s Equity  Common stock  Retained Earnings

9. Income Statement

10. Statement of Cash Flows  Cash flows from operations  Cash flows from financing  Cash flows from investments

11. Management Accounting  Costs - payments of cash or other assets in return for a benefit. Direct & indirect material Direct & indirect labor Factory overhead  Product costs vs Period costs  Fixed costs vs Variable costs

12. Segment Profit Analysis  Determine the profit contributed by various market segments geographic, product, gender, etc.  Contribution margin sales less the variable costs  Contribution margin ratio contribution margin / sales

13. Tax Accounting  To pay the lowest amount of taxes possible in a legal manner. Following the rules of the Internal Revenue Service.

14. Finance Dr. Richardus Eko Indrajit

15. Finance  The study of how to manage assets and obtain funds to meet a company’s long- term business goals.

16. Areas of Finance  Financial markets - mechanisms for bringing together those who have money to invest with those who need funds.  Financial institutions - collects funds from savers and lends them to or invests them in business or people that need cash.  Financial management - how an organization should manage its assets, liabilities, and equity to produce a good or service.

17. Financial Markets  Functions matching savers and users of funds liquidity diversification sending signals and information  Expected returns and interest rates  Nominal risk-free rate of return  Risk

18. Types of Financial Markets  Money and capital markets treasury bills commercial paper negotiable certificates of deposit  Primary and secondary markets initial public offerings organized exchanges - NYSE, AMEX over-the-counter - NASDAQ

19. Stock Quotations  52 week and daily Hi - Lo  Stock  Sym  Div  Yld %  PE  Vol  Close  % change

20. Financial Institutions  Depository institutions  Contractual savings institutions  Investment institutions  Venture capital  Market-financed intermediaries  Factors

21. Financial Management  Capital Budgeting  Capital Structure  Net working capital Current Assets Fixed Assets Current Liabilities Long-term Debt Equity Operating Decisions Operating Decisions Capital Structure Decisions Capital Budgeting Decisions Total Assets = Total Liabilities + Equity

22. Financial Positions  Treasurer the financial officer who oversees the traditional functions of financial analysis, capital budgeting, short-term and long-term financing decisions and current asset management  Controller the individual who manages accounting, cost analysis and tax planning  Financial Analyst a staff member who diagnoses the effects of management proposals or decisions on the financial health of a company  Securities Analyst a financial analyst who examines the stock prices of companies in a given industry and makes recommendations to clients as to whether the price is too low or too high.

23. Value of a Firm  Shareholder wealth Market value of a firm’s common stock stock price * number of shares outstanding  Market value added market value of stock + market value of debt - book value of stock - book value of debt

24. Corporate Governance  Principal-Agent Problem Principals: shareholders of a company Agents: managers who run a firm in the best interest of the principals  Reducing Problems Incentives Increased information flows