Week 5 - Lecture 11.1 Time Value of Money ● Assets and liabilities are measured based on current value ○ Value changes over time ○ Comparing cash

Week 5 - Lecture 11.1 Time Value of Money ● Assets and...

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Lecture 11.1: Time Value of Money Assets and liabilities are measured based on current value Value changes over time Comparing cash flows now with cash you will get in the future Compound interest- ability to earn interest on interest Interest payments are reinvested and earn more interest Lecture 11.2: Future and Present Value Future value- to move cash flows forward in time, compound To compare, convert future cash flows to present values, called discounting Discount rate is investment return (what you would get from investing present amount) Lecture 12.1: Operating Liabilities and Contingencies PROBABLE loss or expense will occur, amount can be reasonably estimated, recognize as accounting liability (called recognition) REASONABLY POSSIBLE that loss or expense will occur, disclose contingency in footnote, doesn’t have to be a line item but still need to mention REMOTE there is no need to recognize or disclose Lecture 12.2: Bonds Bonds- long term debt, company borrows money and promises to pay amount and interest in the future Semiannual compounding- 2 payments every half year
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Lecture 12.3: Bond Interest Rates
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