1. Analyzing and Using Financial Information
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2. What Is Accounting? Financial accounting Management accounting
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3. What Accountants Do Bookkeeping Cost accounting Tax accounting
Financial analysis
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4. Ten Most Important Accounting Skills
Analytical
Problem solving
Interpersonal
Listening
Communication
Leadership
Decision making
Time management
Teamwork
Computer
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5. Types of Accountants Private Public CMA or CPA Internal audit CPA
External audit
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6. Typical Finance Department
Board of
Directors
President
Vice President
Sales
Vice President
Finance
Vice President
Manufacturing
Treasurer
Controller
Credit
Manager
Inventory
Manager
Director
of Capital
Budgeting
Cost
Accounting
Financial
Accounting
Tax
Department
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7. Accounting Rules Generally Accepted Accounting Principles (GAAP)
Financial Accounting Standards Board (FASB)
International Accounting Standards (IAS)
Securities and Exchange Commission (SEC)
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8. Problems in Public Accounting
Deliberate deception
Auditing shortcuts
Conflicts of interest
Aggressive business tactics
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9. Sarbanes-Oxley Act Advantages Disadvantages Auditor authority
Conflict of interest
Investor protection
Accountability
Disadvantages
Implementation
Compliance cost
Enforcement
Reporting
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10. Accounting Concepts The accounting equation Double-entry bookkeeping
The matching principle
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11. The Accounting Equation
Owner’s Equity:
Assets – Liabilities = Owner’s Equity
Accounting Equation:
Assets = Liabilities + Owner’s Equity
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12. Maintaining a Balance Double-entry bookkeeping Matching principle
Credit purchase
Cash purchase
Matching principle
Accrual basis
Cash basis
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13. How Are Financial Statements Used?
A transaction takes place
The transaction is measured and recorded
Journal entries are analyzed and posted to a ledger
Account data are summarized and used to prepare budgets, reports, and financial statements
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14. Understanding Financial Statements
Balance sheet
Income statement
Cash-flow statement
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15. The Balance Sheet Assets Liabilities and shareholder’s equity Current
Fixed
Liabilities and shareholder’s equity
Current liabilities
Long-term liabilities
Shareholder’s equity
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16. The Income Statement Revenues Gross Sales
Less Sales Returns and Allowances
Cost of Goods Sold
Beginning Inventory + Net Purchases – Ending Inventory
Operating Expenses
Selling Expenses
General Expenses
Income Taxes
Net Income After Taxes
Net Income Before Taxes – Income Taxes
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17. The Cash-Flow Statement
Operations
Investments
Financing
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18. Analyzing Financial Statements
Trend Analysis
Ratio Analysis
Consider More
Than One Ratio
Uncover Business Shifts
Consider Extraordinary
Circumstances
Check Specific Data
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19. Types of Financial Ratios
Profitability
Liquidity
Activity
Leverage
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20. 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
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21. Liquidity Ratios Current Ratio Current Assets/Current Liabilities
Quick Ratio
Current Assets – Inventory/Current Liabilities
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22. Activity Ratios Inventory Turnover
Cost of Goods Sold/Average Inventory
Accounts Receivable Turnover
Sales/Average Accounts Receivable
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23. Leverage Ratios Debt to Equity Total Liabilities/Total Equity
Debt to Total Assets
Total Liabilities/Total Assets
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24. Developing and Implementing
Financial Management
Developing and Implementing
a Financial Plan
Amount of funds
Sources of funds
Uses of funds
Monitoring Cash Flow
Cash
Inventory
Receivables and payables
Developing a Budget
Financial control
Capital investments
Capital budgeting
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