Complete FIN 300 Lecture Slides Ch. 2

Complete FIN 300 Lecture Slides Ch. 2 - Financial...

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Click to edit Master subtitle style 2/1/11 Financial Statements Balance Sheet Income Statement Cash Flow Statement Statement of Stockholder’s Equity
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2/1/11 The Balance-Sheet Model of the Firm Total Value of Assets: Total Firm Value to Investors: Current assets Fixed Assets 1. Tangible 2. Intangible Current Liabilities Long-Term Debt Shareholders' Equity
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2/1/11 The Balance-Sheet Model of the Firm The Capital Budgeting Decision Current assets Fixed Assets 1. Tangible 2. Intangible Current Liabilities Long-Term Debt Shareholders' Equity
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2/1/11 The Balance-Sheet Model of the Firm The Capital Structure Decision Current assets Fixed Assets 1. Tangible 2. Intangible Current Liabilities Long-Term Debt Shareholders' Equity
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2/1/11 The Balance-Sheet Model of the Firm The Net Working Capital Investment Decision Current assets Fixed Assets 1. Tangible 2. Intangible Current Liabilities Long-Term Debt Shareholders' Equity
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2/1/11 The Balance Sheet • The balance sheet presents a summary of a firm’s financial position at a given point in time. • An accountant’s snapshot of the firm’s accounting value on a particular date. • Assets indicate what the firm owns, equity represents the owners’ investment, and liabilities indicate
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2/1/11 Accounting Liquidity • Ease and quickness to convert asset into cash • Current assets most liquid • More liquid a firm’s assets, less likely to have problems meeting short-term obligations.
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2/1/11 Debt versus Equity • Generally, when a firm borrows it gives the bondholders first claim on the firm’s cash flow. • Thus shareholder’s equity is the residual difference between assets and liabilities.
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2/1/11 Value versus Cost • Under GAAP audited financial statements of firms in the U.S. carry assets at cost. • Market value is a completely different concept because market value is not recorded on the balance sheet whereas the book value or historical cost is. The market value
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2/1/11 Table 2.1 Global Conglomerate Corporation Balance Sheet for 2005 and
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2/1/11 Example 2.1 Market Versus
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2/1/11 Example 2.1 Market Versus Market cap = # shares outstanding x price per share Global’s market cap = 3.6 million shares x $14/share = $50.4 million
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This note was uploaded on 01/31/2011 for the course FINANCE 300 taught by Professor Xiao during the Spring '10 term at UChicago.

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Complete FIN 300 Lecture Slides Ch. 2 - Financial...

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