lec1 - Introduction 15.511 Corporate Accounting Summer 2004...

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1 Introduction 15.511 Corporate Accounting Summer 2004 Professor SP Kothari Sloan School of Management Massachusetts Institute of Technology June 7, 2004
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2 Session 1: Agenda ± Administrative matters ± Discussion of Accounting ± Why is accounting interesting? ± Why do we need accounting? ± Course objective ± Sophisticated financial statement user ± An overview of information in financial statements
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3 The required materials are: ± 10th Edition of Stickney and Weil ± Financial Accounting: An Introduction to Concepts, Methods, and Uses ± Case Packet ± Class web server ± Syllabus ± Schedule ± Homework assignments ± Sample exams
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4 Course Grading ± Written Problem Sets 25% ± Midterm 30% ± Final 45%
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5 Accounting Introduction ± Discussion of Accounting ± Why is accounting interesting? ± Why do we need accounting? ± Course objective ± Sophisticated financial statement user ± An overview of financial information
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6 What is Accounting trying to do? Demand for Information ± Financial Accounting ± Provides information primarily to people outside the company ± Provides information that would be helpful in attracting capital ± Equity and debt (useful in debt contracts) ± Credit from suppliers ± Customers ± Employees ± Provides information helpful in monitoring and evaluating management performance ± Managerial Accounting ± Provides information to people inside the company ± Internal investment decisions ± Performance evaluation ± Tax Accounting ± Provides information to the tax authorities ± Legal to prepare separate books for tax and financial purposes
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7 Why do We Need Financial Accounting? Company Outsiders - investors - employees - suppliers Resources Today Resources Tomorrow
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8 Why do We Need Financial Accounting? Company Outsiders - Investors - Suppliers -Cred itors Resources Today Resources Tomorrow Information (e.g., financial statements) Financial accounting promotes the exchange of resources
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9 Nature of Financial Accounting Information ± Useful to those making investment and credit decisions, who have a reasonable understanding of business and economic activities. ± Helpful to ± present and potential investors ± creditors ± other users ± in assessing the amount, timing, and uncertainty of future cash flows. ± Provides information about economic resources, the claims to those resources, and the changes in them.
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10 How important is this information? The Reaction of Wal-Mart Stock to Announcement of 3rd Quarter Earnings
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lec1 - Introduction 15.511 Corporate Accounting Summer 2004...

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