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Accounting and Financial Management Chapters 17 and 18 BCEN 1400.

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Presentation on theme: "Accounting and Financial Management Chapters 17 and 18 BCEN 1400."— Presentation transcript:

1 Accounting and Financial Management Chapters 17 and 18 BCEN 1400

2 Why Do We Need Accounting? Accounting: –Recording, classifying, summarizing, and interpreting financial data –Helps us to gauge how well the firm is performing and to report this

3 Types of Accounting Managerial –Measures cost and budget information Financial –Preparation for external users –FASB Financial Accounting Standards Board GAAP Auditing Tax Government

4 Becoming an Accountant Bachelor’s in Accounting CPA, CIA, CMA Forensic accounting Faster than average job growth –Sarbanes-Oxley Act Public Company Accounting Oversight Board Median salary: $51,000

5 The Accounting Cycle Enter transactions into journals Transfer transactions to ledger Prepare a trial balance Create financial statements Read and analyze financials

6 The Financial Statements Balance Sheet –Snapshot of what the firm owns Income Statement –Revenue versus costs over a period of time Statement of Cash Flows –Inflow and outflow of cash over period of time

7 The Most Important Equation You Will Need in Accounting

8 The Balance Sheet Assets: –Current Assets –Fixed Assets –Intangible Assets Liabilities –Accounts payable, notes payable, bonds payable Owners’ Equity

9 The Income Statement Revenue –Monies earned by the firm Cost of Goods Sold –Production, raw materials, storage, piecerate labor –FIFO versus LIFO Operating Expenses Net Profit – Retained Earnings

10 Statement of Cash Flows Separated into Cash Flows from Operations, Investing, and Financing Operations –Sales, COGS, expenses, purchases, bills, taxes, interest paid and received Investing –New equity, equipment The Importance of Cash

11 Ratios Help to compare year to year and compare your firm to others of different sizes Liquidity – how fast could you cover your debt? –Current ratio Can also do working capital (CA-CL) –Quick ratio Current Assets Current Liabilities Current Assets - Inventory Current Liabilities

12 Ratios Leverage –Debt-to-equity –Why it’s important to keep this level Profitability –Profit margin –Earnings per share –Return on equity Long-Term Debt Owners Equity Net Profit Sales Net Profit # Shares Outstanding Net Profit Owners Equity

13 Ratios Activity ratios –Inventory turnover Cost of Goods Sold Average Inventory

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