chapter 3 - Chapter 3 Accounting and finance COPYRIGHTZHULI...

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COPYRIGHT©ZHULI 1 Chapter 3 Accounting and finance
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COPYRIGHT©ZHULI 2 Objectives 1. Interpret the information contained in the balance sheet, income statement, and statement of cash flows 2. Distinguish between market and book values 3. Explain why income differs from cash flow 4. Understand the essential features of the taxation of corporate and personal income
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COPYRIGHT©ZHULI 3 Content The balance sheet The income statement The statement of cash flows Accounting practice and malpractice Taxes
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COPYRIGHT©ZHULI 4 The balance sheet presents a snapshot of the firm’s assets and liabilities at one particular moment
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COPYRIGHT©ZHULI 5 Assets The assets represent the uses of cash raised There are two classes of assets Current assets : assets that will soon be used or turned into cash, e.g. accounts receivables, inventories Long-term or fixed assets Tangible assets e.g. buildings, equipment Intangible assets e.g. brand, goodwill
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COPYRIGHT©ZHULI 6 Liabilities The liabilities represent the sources of the cash There are two classes of liability Current liabilities : liabilities that are due for payment shortly, e.g. accounts payable Long-term liabilities e.g. bond payable Net current assets/net working capital = current assets – current liabilities
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COPYRIGHT©ZHULI 7 Shareholder’s equity The difference between the assets and the liabilities represents the amount of the shareholders’ equity Shareholders’ equity are called ‘residual claimants’, which means that shareholders’ equity is what left over when the liabilities of the firm are subtracted from its assets Shareholders’ equity = total assets – total liabilities
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COPYRIGHT©ZHULI 8
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This note was uploaded on 05/11/2010 for the course BUSINESS S 409 taught by Professor Terryryan during the Summer '10 term at Winthrop.

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chapter 3 - Chapter 3 Accounting and finance COPYRIGHTZHULI...

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