ACC501 HANDOUTS PDF

Table of Contents

Business Finance refers to the funds and liabilities spent on a business. Finance is the foundation of a business. Financial needs are the purchase of goods, goods, immature goods, and other economic activities. ACC501 HANDOUTS PDF

Course Category: Accounting, Banking & Finance

Course Outline

Introduction to Business Finance, Business Organizations, Financial Markets and Financial Statements, Income Statement and Taxes, Financial Cash Flows and Cash Flow Statement, Financial Statement Analysis, Ratio Analysis, The Du Pont Identity, Using Financial Statement Information, Time Value of Money, Discounted Cash Flow Valuation, Annuities Cash Flow, Perpetuities, Loans, Bonds and Valuing Bonds, Bond Price Theorems, Bond Indenture, Bond Ratings, Different Types of Bonds, Determinants of Term Structure,

Equity Markets and Stock Valuation, Some Special Cases in Stock Valuation, NPV and Payback Rule, Average Accounting Return and Internal Rate of Return, Capital Budgeting, Making Capital Investment Decision, Pro Forma Financial Statements, Depreciation, Capital Investment Decisions, Returns, Variability of Returns, Portfolio, Risk, Weighted Average Cost of Capital, Capital Structure, Business and Financial Risk, Bankruptcy Costs, Static Theory of Capital Structure, Operating Cycle and Cash Cycle, Short-Term Financial Policy, Short-Term Borrowing, Float and Cash Management, Credits, and Receivables, Inventory Management. ACC501 HANDOUTS PDF

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Business finance

Value Versus Cost

Performance appraisal is a review of any part of business processes and procedures for the purpose of The real value of any property is its market value, which is simply the amount of money we could have earned if we had actually sold it. The prices shown on the balance sheet of the factory assets are book prices and are usually not the number of assets that are actually worth it. Under the Accounting standards, audited firms’ financial statements manage assets at historical cost.  In current assets, market value and book value may be somewhat similar as they are purchased and converted into cash in a relatively short period of time.

For fixed assets, it is unlikely that the actual market value of an asset will be equal to its book value. o Example: Land purchased for railways a hundred years ago  Similarly the owner’s budget amount on the balance sheet and the actual market value of the budgets should not be related.  For financial managers, the amount of budget accounting is not a concern but rather a vital stock market value.

Significance Of Financial Statement

The reason, we rely on accounting statistics for a lot of financial information is that we can almost always find all the market information we need.  The only reasonable measure of business measurement decisions is whether they create economic value or not.  Obviously, one important goal of an accountant is to report financial information to the user in a useful way in making decisions.  But financial statements do not come with a user guide.  We will try to close this gap by reading a complete analysis of the financial statement.

Interest-Only Loans

Interest Loan Only  Requires the borrower to pay interest each time and repay the entire principal at a later time.  For 3 years, 10%, interest rate of only $ 1,000, the borrower will pay $ 1,000 x 0.10 = $ 100 interest at the end of the first and second years,  At the end of the third year, you will repay $ 1000 and $ 100 interest for that year. Loans repayable  Loans repayable require the borrower to repay parts of the loan amount over time.

Amortized loan

The repayment loan requires the borrower to repay parts of the loan amount over time.  The principal loan repayment procedure is called amortizing the loan. Loans can be reduced in two ways: o The borrower pays interest each time and a fixed amount, e.g. Medium-term business loans The borrower makes one permanent payment, car loan, and mortgage.

ACC501 HANDOUTS PDF | Business Finance Handouts