Unit 1_ Framework for Business Analysis and Valuation Using Financial Statements Presentation

Unit 1_ Framework for Business Analysis and Valuation Using Financial Statements Presentation

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Accounting 4115 Unit 1: Framework for Business Analysis and Valuation Using Financial Statements Notes and Narration by Jo Lynne Koehn, University of Central Missouri
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Key Concepts in Unit 1 Financial statements are an important source of information to the capital markets and business analysts. Analyzing financial statements addresses a number of issues of interest to external stakeholders and company insiders.
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The Role of Financial Reporting in Capital Markets Financial reporting provide much-needed information to capital market participants Financial intermediaries depend upon the information in financial statements to evaluate investment opportunities. Examples of Financial intermediaries? Information intermediaries assure the quality of financial statement representations. Information intermediaries? Relevant and reliable financial information is essential for the functioning of capital markets.
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Market for Lemons Good and Bad Investment Opportunities Exist Let’s say half good/half bad. If we only rely on self-reporting all entrepreneurs will say their opportunities are good. With no way for good to prove goodness, the good will not receive the capital they deserve. Thus, they will drop out and we would have disproportionate bad opportunities. Moral- We need intermediaries.
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From Business Activities to Financial Statements Financial statements measure and summarize the economic consequences of business activities. Accounting systems facilitate information quality.
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This note was uploaded on 02/09/2012 for the course ACCT 4115 taught by Professor Jin during the Summer '11 term at UCM.

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Unit 1_ Framework for Business Analysis and Valuation Using Financial Statements Presentation

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