m3l5 - David Robinson © D Robinson 2009 Spring 2009 Module...

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Unformatted text preview: David Robinson © D. Robinson, 2009 Spring 2009 Module 3 Accounting & Finance Lecture 5: Statement of Cash Flows Auditing Accounting & Finance Accounting Finance Managerial Financial Auditing How investors use their money How firms raise money Three financial statements Forms of business Income St. Balance Sheet St. Cash Flows Finance and Accounting 1. Why we need the Statement of cash flows 2. Auditing: What it is, why it’s important Why we need the Statement of Cash Flows 22 Format for the Income Statement Revenues “Net sales”-Expenses COGS------------- “Gross profit”-Depreciation-SG&A-Interest Income (“Profit”) Tax (Corporate Income Tax) Net Income (“ Bottom line ”) Before tax Net Income/number of shares = “Earnings per share” Format of the Balance Sheet 1. Assets a. Current Assets b. Fixed (or long-term) assets 2. Liabilities a. Current Liabilities b. Long-term Liabilities 3. Owners’ Equity We can’t see if/where dividends were paid, or if and how we raised new money from just the Income St. & Balance Sheet Statement of Cash Flows 1 . Cash flows from operations a. + our income b. - building up inventory, more money owed to the firm 2. Investing a. + sale of investments or equipment b. - buying long term PPE 3. Financing a. + Money from stock and bond sales b.- Dividends paid, bonds paid off SBUX Statement of Cash Flows Auditing Without it, we could not have public corporations Comment • You are having some experience with “auditing” on your paper topic: What would you do to catch your partner? An Introduction to Auditing • Public accountants – Regulated licensure by the states – But the Securities & Exchange Commission (SEC) ( Federal ) relies on them A bit of a paradox Why we need auditors 1. Each investor doesn’t have the time and skill to check the books of each company...
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m3l5 - David Robinson © D Robinson 2009 Spring 2009 Module...

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