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fin1 - Financial Statements and Cash Flow An Overview...

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ECON 333 Spring 08 1 Financial Statements and Cash Flow: An Overview Accounting is not the same as finance, but if you don’t understand the basics of accounting, you don’t understand finance, either. An expert
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ECON 333 Spring 08 2 Financial Statements and Cash Flow Learning objectives: Interpret the information contained in the balance sheet, income statement, and the statement of cash flows. Distinguish between book and market values. Understand the essential features of the taxation of corporate and personal income, and know the difference between average and marginal tax rates. Understand and explain the difference between accounting income and cash flow. Calculate a firm’s cash flow.
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ECON 333 Spring 08 3 This section focuses on: 1- The Balance Sheet 2- The Income Statement 3- Taxes 4- Net Working Capital 5- Financial Cash Flow 6- The Accounting Statement of Cash Flows
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ECON 333 Spring 08 4 The Balance Sheet The Balance Sheet is a financial statement that shows the firm’s assets and liabilities at a particular time (from an accounting perspective). The Balance Sheet identity: Assets Liabilities + Stockholder’s Equity The first important point to notice is that the assets (LHS of the table) are listed in order by the length of time it would normally take a firm with ongoing operations to convert them into cash.
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ECON 333 Spring 08 5 The Balance Sheet . The Main Balance Sheet Items Current Assets Cash & Securities Receivables Inventories + Fixed Assets Tangible Assets Intangible Assets Current Liabilities Payables Short-term Debt + Long-term Liabilities + Shareholders’ Equity =
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