Notes - Finance 3/31/09 Financial Manager - Investing o Put...

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Finance 3/31/09 Financial Manager - Investing o Put money into something expecting to get more money out of it - Budgeting/Allocating - Raise capital o Financing Issue Debt Issuing Equity - Managing risk Forms of Business Organizations - Sole Proprietorship – single owners - Partnership – multiple owners - Corporation Advantages Disadvantages SP and Partnership Keep all the profit Unlimited Liability Taxed once Difficult to raise capital Ease of Formation Limited Life Few regulations Corporation Limited Liability Double Taxation Ease of Transferring Ownership Heavily Regulated Ease of raising capital Goal of a Corporation - Maximize Shareholder Wealth Value of Firm= f(I, F, D) I= Investing F= Financing, decision D= Dividend Decision V firm =sum of(CF/K) CF= Cash Flow K= Quality or riskyness of the CF A=L+E A= Assets to make money L= Liabilities to buy assets E= Equity to buy assets
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Finance 4/2/09 Balance Sheet - The balance sheet is a snapshot of the firm’s assets and liabilities at a given point in time - Assets are listed in order of decreasing liquidity o Ease on conversion to cash without significant loss of value - Balance Sheet Identity o Assets=Liabilities + Stockholder’s Equity Income Statement - The income statement is more like a video of the firm’s operations for a specified period of time - You generally report revenues first and then deduct any expenses for the period Net Income can be used to pay dividends or reinvest in the company (Retained Earnings) Income Statement Revenue COGS Depreciation Earnings Before Interest and Tax/Operating Income Interest Taxes Net Income Balance Sheet Assets Current Assets Cash A/R Inventory Long term Assets Fixed Assets Liabilities Current Liabilities A/P Long Term Liability Long term Debt Stockholder’s Equity Common Stock
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Par Value PIC – Paid in Capital in excess of par The Concept of Cash Flow
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Notes - Finance 3/31/09 Financial Manager - Investing o Put...

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