1. © 2006 Pearson Education Canada Inc.Chapter 13 - 1 Chapter 13 Analyzing and Using Financial Information

2. © 2006 Pearson Education Canada Inc.Chapter 13 - 2 What Is Accounting? Communication Measuring Interpreting FinancialAccountingFinancialAccountingManagementAccountingManagementAccounting Decision Making

3. © 2006 Pearson Education Canada Inc.Chapter 13 - 3 What Accountants Do TaxAccountingTaxAccounting BookkeepingBookkeeping FinancialAnalysisFinancialAnalysis CostAccountingCostAccounting

4. © 2006 Pearson Education Canada Inc.Chapter 13 - 4 Ten Most Important Accounting Skills Analytical Problem solving Interpersonal Listening Communication Leadership Decision making Time management Teamwork Computer

5. © 2006 Pearson Education Canada Inc.Chapter 13 - 5 Types of Accountants Private or (Corporate) accountants work for a businesses other than a public accounting firm Public accountants, are independent of the clients they serve Most are employed by accounting firms Members of the firm are generally CA’s PrivatePublic

6. © 2006 Pearson Education Canada Inc.Chapter 13 - 6 Types of Accountants Chartered Accountant Certified Management Accountant Certified General Accountant

7. © 2006 Pearson Education Canada Inc.Chapter 13 - 7 Accounting Rules Generally Accepted Accounting Principles (GAAP) Financial Accounting Standards Board (FASB) Canadian Institute of Chartered Accountants (CICA)

8. © 2006 Pearson Education Canada Inc.Chapter 13 - 8 Fundamental Accounting Concepts The Accounting Equation Double-Entry Bookkeeping The Matching Principle

9. © 2006 Pearson Education Canada Inc.Chapter 13 - 9 The Accounting Equation Owner’s Equity: Accounting Equation: Assets = Liabilities + Owner’s Equity Assets – Liabilities = Owner’s Equity

10. © 2006 Pearson Education Canada Inc.Chapter 13 - 10 Basic Accounting Concepts Double-EntryBookkeepingDouble-EntryBookkeepingMatchingPrincipleMatchingPrinciple CashBasisCashBasisAccrualBasisAccrualBasisCashPurchaseCashPurchaseCreditPurchaseCreditPurchase

11. © 2006 Pearson Education Canada Inc.Chapter 13 - 11 How Are Financial Statements Used?

12. © 2006 Pearson Education Canada Inc.Chapter 13 - 12 Understanding Financial Statements Balance Sheet Income Statement Cash-Flow Statement

13. © 2006 Pearson Education Canada Inc.Chapter 13 - 13 The Balance Sheet Assets Liabilities and Shareholder’s Equity Current AssetsFixed Assets Current Liabilities Long-Term Liabilities Shareholder’s Equity

14. © 2006 Pearson Education Canada Inc.Chapter 13 - 14 The Income Statement OperatingExpensesOperatingExpenses RevenuesRevenues Net Income After Taxes Net Income After Taxes Cost of Goods Sold Cost of Goods Sold

15. © 2006 Pearson Education Canada Inc.Chapter 13 - 15 The Cash-Flow Statement Operations Investments Financing

16. © 2006 Pearson Education Canada Inc.Chapter 13 - 16 Analyzing Financial Statements Trend Analysis Ratio Analysis Consider More Than One Ratio Uncover Business Shifts Consider Extraordinary Circumstances Check Specific Data

17. © 2006 Pearson Education Canada Inc.Chapter 13 - 17 Types of Financial Ratios ActivityLeverage ProfitabilityLiquidity

18. © 2006 Pearson Education Canada Inc.Chapter 13 - 18 Profitability Ratios Return on Sales = Net Income Net Sales Return on Equity = Net Income Total Owner’s Equity Earnings per Share = Net Income Average Shares Outstanding

19. © 2006 Pearson Education Canada Inc.Chapter 13 - 19 Liquidity Ratios Working Capital = Current Assets – Current Liabilities Current Ratio = Current Assets Current Liabilities Quick Ratio = Current Assets – Liabilities Current Liabilities

20. © 2006 Pearson Education Canada Inc.Chapter 13 - 20 Activity Ratios Inventory Turnover = Cost of Goods Sold Average Inventory Receivables Turnover = Sales Average Accounts Receivable

21. © 2006 Pearson Education Canada Inc.Chapter 13 - 21 Leverage Ratios Debt to Equity = Total Liabilities Total Equity Debt to Total Assets = Total Liabilities Total Assets

22. © 2006 Pearson Education Canada Inc.Chapter 13 - 22 Financial Management Developing and Implementing a Financial Plan Monitoring Cash Flow Developing a Budget Amount of funds Sources of funds Uses of funds Cash Inventory Receivables and payables Financial control Capital investments Capital budgeting