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0Slide 1 Acctg & Economy

0Slide 1 Acctg & Economy - Role of Accountancy in a...

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Role of Accountancy in a Market Economy with Financial Markets : Product Market money capital Financial Markets material Reliable Accounting Information physical capital a) Financial Position 1 labor b) Income Statement wage$ c) Stmt. of Retained Earnings d) Stmt. of Cash Flow Consumer Producer $ $ good/svc Risk – Return 30-years 2 $pend FDIC -- 3% Bank Savings: $24,000 3 $ave AA to D – 8% Bonds—corp.: $111,000 $10,000 Dow 30 -- 13% $ Stocks : $320,000 2. BUSINESS GOALS Profitability = return on investment at appropriate risk Firm : return on assets = net income / assets Shareholder : return on equity = net income / shareholder equity Solvency = ability to pay debt when due Near-term : current ratio = current assets / current liabilities Long-term : debt-asset ratio = total liabilities / total assets
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3. BUSINESS ACTIVITIES Financing = issue (or retire) debt or stock, or pay dividends. Investor
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