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Chapter 2 - BA 3341 Business Finance Nataliya...

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1 BA 3341 Business Finance Nataliya Polkovnichenko, Senior Lecturer
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2 Accounting records past activity, while finance is interested in the valuation of future activity. Just as knowledge of history helps give you insight into what may happen in the future, an understanding of accounting is required to give you insight into finance.
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3 Balance Sheet (Net Working Capital) Book Value vs. Market Value Income Statement Cash Flow Statement • Taxes
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4 Balance Sheet – shows the value of the firm’s assets and liabilities at a particular time. Items in the balance sheet are valued according to Generally Accepted Accounting Principles (GAAP) which state that assets must be shown at their historical cost adjusted for depreciation.
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5 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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6 The total number from left hand side (the value of the assets) should always equal the total number
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