lec2 - Balance Sheet Investments and Financing 15.511...

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1 Balance Sheet: Investments and Financing 15.511 Corporate Accounting Summer 2004 Professor SP Kothari Sloan School of Management Massachusetts Institute of Technology June 8, 2004
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2 Questions from last class ± Do private companies file with the SEC? ± Only if they have pubic debt outstanding.
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3 Financial Statements – the Annual Report ± Management Discussion ± Auditor’s Report ± Consolidated Balance Sheet ± Consolidated Net Income ± Consolidated Statement of Stockholders Equity ± Consolidated Cash Flow Statements ± Notes to Accounts
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4 Balance Sheet: Assets ± Assets ± Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. ± The specific types of assets a firm owns depends on the nature of its business -- manufacturing (e.g., General Motors) vs. merchandising (e.g., K mart) vs. financial (e.g., Citicorp) vs. service (e.g., H & R Block) business.
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5 Balance Sheet: Assets ± Current assets ± Cash and other assets that are reasonably expected to be realized in cash or consumed during the normal operating cycle of the business or within one year, whichever is longer whichever is longer . ± Cash and cash equivalents ± Short-term investments -- at market value -- We will discuss this in detail later. ± Accounts receivable -- Net realizable value ± Inventory -- Lower of Historical Cost or Market Value (current replacement cost) ± Prepaid expenses
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6 Cash payment Inventory Accts. Rec. (Raw material to finished goods) Cash collection ± ±² ± ±³ ´ ± ± ´ ± Definition: an operating cycle is defined as the elapsed time between the start of production and the eventual receipt cash from customers from the sale of the product Operating cycle sale The Operating Cycle
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7 Balance Sheet: Assets ± Long-Term Investments ± Investments intended to be held for a period of time usually extending beyond one year. ± Debt and equity securities such as stocks, bonds, and long-term notes receivable. ± Tangible assets not currently used in operations, e.g., land held for investment purposes.
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8 Balance Sheet: Assets ± Property, Plant, and Equipment ± Assets of a durable nature that are to be used in the production or sale of goods, or rendering of services, rather than being held for sale. ± Machinery, Factory Building, etc. ± Carried at Cost (-) Accumulated Depreciation ± Land on which the company conducts its operations is carried on the balance sheet at the original cost – no depreciation. ± Distinguish from land held for investment purposes.
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9 Balance Sheet: Assets ± Intangible Assets ± Non-current, non-physical assets of a business, the possession of which provides uncertain future benefits to the owner ± E.g., goodwill, trademarks, patents, copyrights, etc.
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This note was uploaded on 04/05/2010 for the course FINANCE AN FRE6003 taught by Professor Marshall,ingridm during the Spring '09 term at NYU Poly.

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lec2 - Balance Sheet Investments and Financing 15.511...

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