Notes 9_Fina Acct_I

Notes 9_Fina Acct_I - MII Business Fundamentals Part 1...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
IELM120 1 MII Business Fundamentals Part 1 – Financial Accounting and Analysis
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
IELM120 Learning Objectives Know the basic form of business organization Understand the basic accounting equation Understand balance sheet and income statement Know the basic financial ratios Understand and perform deprecation analysis 2
Background image of page 2
IELM120 Introduction Financial accounting and analysis serve the important corporate functions of reporting and evaluating the financial health of a firm. Financial documents provide a method to communicate financial information to internal and external parties Knowing how to read and analyze Financial Statements enables managers to understand the firm’s performance, profitability and market position, and facilitates decision making. 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
IELM120 Forms of Business Organization 4 Sole proprietorship Easy to start Least regulated Single owner keeps all profit Unlimited liability Limited to owner’s life Difficult ownership transfer Partnership Easy to start Two or more owners keep all profit Unlimited liability Must be dissolved when one partner dies or wants to sell Difficult ownership transfer Corporation Complex and costly to setup Limited liability Unlimited life Easy to raise funds Easy ownership transfer
Background image of page 4
IELM120 Financing a Business Money you can use to finance your business comes in two flavours: Debt is when you borrow money to be paid back over a period of time, usually with interest (the cost of borrowing), e.g., taking long-term loans from financial institutions or issuing corporate bonds to public. Equity is when you exchange a share of your business for money, with no need for repayment at any point in time, e.g., issuing company stocks. 5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
IELM120 Basic Accounting Equation Assets (A) are economic resources owned by a company cash, accounts receivable, inventory, land, machine, plant facilities, etc. Liabilities (L) are economic obligations that a company owes to outsiders, called creditors or lenders accounts payable, loans, taxes, expenses, etc. Owners’ Equity (OE) is difference between the total value of assets and the total value of liability. stocks, retained earnings, etc also called Stockholders’ Equity or Shareholders’ Equity Fundamental Accounting Equation : A = L + OE 6
Background image of page 6
IELM120 T-Account 7 Name of Account Debit Credit A simple tool used to aid in the analysis of business transactions. If a transaction takes place, at least two of these accounts are affected (i.e., a “ double entry ” or zero sum ” approach) The words debit and credit only mean left and right, nothing more or less! Rules: Increases in assets are debited to the account.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/28/2011 for the course IELM 120 taught by Professor Fu,qi during the Spring '09 term at HKUST.

Page1 / 36

Notes 9_Fina Acct_I - MII Business Fundamentals Part 1...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online