What is accounting
reporting and summarizing on the past
What is finance?
how you can increase and build future wealth
What are the 4 main positions in a public company and give a brief description of their roles?
- CEO
- top manager responsible for overall operations - CFO
- manages financial matter - COO
- make sure company is running effeciently - Board of Directors
- oversees managment team
What are inflows and outflows of financing activities?
Inflows: issuing shares, taking out a loan
Outflows: paying dividends, repurchasing shares, repaying loans
What are the inflows and outflows of investing activities?
Inflows: proceeds from selling long-lived assets, proceeds from selling shares of other companies
Outflows: buying long-lived assets, buying shares of other companies
What are the inflows and outflows of operating activities?
Inflows: Revenues, collection of receivables, sale of service or goods
Outflows: expenses, payment if payables, purchase of inventory and supplies
Who are internal users?
- CEO, CFO, COO
- managers, marketing, HR
- employers (bonuses based off profit)
Who are external user?
- investors and creditors
- customers
- regulators
What are the financial statements?
- statements of income
- reports revenue and expenses for a specific time period - statements of changes in equity
- reports the changes in each at a specific point in time - statement of financial position
- shows the assets, liabilities and shareholders equity at a specific point in time - statement of cash flow
- shows for a specific period of time, how companies obtain cash and how it was used
5.note disclosure
- how the company does there accounting
What are types of businesses?
- Manufacturing - uses raw materials to assemble finished good
- Service - preform tasks for the benefit of the consumer
- Merchandising - resell manufactured goods
What are the 4 forms of businesses?
- proprietorship
- partnership
- corporation
- trust
What is a proprietorship?
- owned by one person
- owner has sales control
- unlimited liability
What is a partnership?
- owned by two or more partners
- each partner has unlimited liability
What is a corporation?
- indefinite life
- owners have limited liability (corporate shield)
- easy to transfer sales
- favourable tax
What is a trust?
- transfer of assets
- managed by trustee
- benefits beneficiaries
What is the accounting equation?
Assets = Liabilities + Owners Equity
What is the equation for common shares?
common shares, beginning of period + common shares issued (sold) - common shares repurchased = common shares, end of period
What is the equation for retained earnings?
retained earnings, beginning of period + net income (loss) - dividends declared = retained earnings, end of period
