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**GUIDELINES FOR EXAMINATION
**

Ioan Alin Nistor Faculty of Business

**Overview – Requirements for the chapters to be covered
**

2

**CHAPTERS: Financial statements
**

Balance

**Sheet Income Statement Statement of Retained Earnings Statement of Cash Flows
**

Financial Ratios Present value & Future Value

3 Examination involves multiple choice questions as well as problems following the chapter requirements mentioned previously. 2012 . Ex: Brealey & Myers . Below will be presented a brief explanation for the requirements. Please note that any learning material that covers the data mentioned is welcomed. Please check the problems covered in class. Ed EFES.Corporate Finance Ex: Ioan Alin Nistor – Finante antreprenoriale.

Financial statements 4 Annual report – four basic financial statements Balance Sheet Income Statement Statement of Retained Earnings Statement of Cash Flows .

common) Retained earnings Total equity TOTAL ASSETS TOTAL LIABILITIES AND EQUITY . intangible assets) Stock (preferred.Balance sheet 5 ASSETS Cash Marketable securities Accounts receivable Inventory LIABILITIES & EQUITY Accounts payable Notes payable Accruals Total current liabilities Total Liabilities Total current assets Long term bonds Fixed assets (property. plant. equipment.

common) Retained earnings Total equity TOTAL ASSETS TOTAL LIABILITIES AND EQUITY . equipment. intangible assets) Stock (preferred.Balance sheet 6 ASSETS Cash Marketable securities Accounts receivable Inventory LIABILITIES & EQUITY Accounts payable Notes payable Accruals Total current liabilities Total Liabilities Total current assets Long term bonds Fixed assets (property. plant.

intangible assets) 1140 Stock (preferred. common) Retained earnings 1000 450 1450 Total equity TOTAL ASSETS 2000 TOTAL LIABILITIES AND EQUITY 2000 .Balance sheet 7 ASSETS 15 5 265 575 860 Cash Marketable securities Accounts receivable Inventory LIABILITIES & EQUITY Accounts payable 45 Notes payable 125 Accruals 130 Total current liabilities Total Liabilities 300 Total current assets Long term bonds 250 550 Fixed assets (property. plant. equipment.

Income statement 8 Net sales Costs excluding depreciation Depreciation Total operating costs Earnings before interest and taxes (EBIT) Less interest Earning before taxes (EBT) Taxes Net income 3000 2650 183 2833 167 30 137 22 115 .

Statement of Cash-flow 9 OPERATING ACTIVITIES (+ or -) Operating activities Depreciation and amortization Changes in other accounts affecting operations: (Increase)/decrease in accounts receivable (Increase)/decrease in inventories Increase/(decrease) in accounts payable Net cash provided by operating activities Capital expenditures Investments in subsidiary Proceeds from sales of investments Increase in notes payable Payments of long-term debt Increase in bonds LONG-TERM INVESTING ACTIVITIES (+ or -) FINANCING ACTIVITIES (+ or -) .

2011 Less: Dividends to common stockholders Balance of retained earnings at Dec.Statement of Retained Earnings 10 Balance of retained earnings at Dec. 31. 31. 2010 Add: 525 75 35 565 Net income. 2011 .

Analysis of Financial Statements – Ratios Analysis 11 Liquidity Analysis Ratios Asset Management Ratios Debt Management Ratios Profitability Ratios .

87 0.Ratios Analysis – Liquidity Analysis Ratios 12 Current assets Current ratio Current liabilities Quick . or acid test Current liabilities Current ratio 860/ 300 (860 .95 .575) /300 2. or acid test Current assets Inventories Current liabilitie s Industry Average Industry Average Comment Comment Current assets Current liabilities Current assets Inventories Quick .

Ratios Analysis – Asset Management Ratios 13 Inventory turnover Sales Inventorie s Fixed assets turnover Sales Net fixed assets Total assets turnover Sales Total assets Days sales outs tan ding Re ceivables Annual sales / 360 .

Ratios Analysis – Asset Management Ratios 14 Inventory turnover Sales Inventories 3000/575 5.5 Comment Days sales outs tan ding Comment 265/ (3000/360) 32 days .63 Comment Total assets turnover Sales Total assets Re ceivables Annual sales / 360 3000/2000 1.21 Industry Average Industry Average Industry Average Industry Average Comment Fixed assets turnover Sales Net fixed assets 3000/1140 2.

5 % Industry Average Comment .Ratios Analysis – Debt Management Ratios 15 Total debt to total assets Total debt Total assets Total debt to total assets Total debt Total assets 550/2000 27.

Ratios Analysis – Profitability Ratios 16 Return on total assets( ROA) Netincome Total assets Return on equity( ROE) Net income Commonequity Pr ofit m argin on sales Net income Sales .

83 % Comment .Ratios Analysis – Profitability Ratios 17 Re turn on total assets ( ROA) Net income Total assets 115/2000 5.9% Industry Average Industry Average Industry Average Comment Re turn on equity ( ROE ) Net income Common equity 115/1450 Comment Pr ofit m arg in on sales Net income Sales 115/3000 3.75 % 7.

Future Value and Preset Value 18 Simple interest Compound interest Future value Present value .

. so interest on interest is not included. using number of periods (years) Simple interest is called simple because it ignores the effects of compounding.19 Simple interest is determined by multiplying the interest rate by the principal by the number of periods. Simple interest = P x I x N Where: P is the amount I is the interest rate N is the duration. The interest charge is always based on the original principal.

loan or debt. FV – future value PV = present value I = interest rate n – nr of periods (years) FV PV (1 i ) n . Future value 20 Compound interest = Interest that accrues on the initial principal and the accumulated interest of a principal deposit. which is calculated as a percentage of only the principal amount. Compounding of interest allows a principal amount to grow at a faster rate than simple interest.Compound interest.

value increases => investment recommended If NPV < 0 .value decreases => investment not recommended .Investment NPV shows the expected increase in value of an investment if adopted If NPV > 0 .Net Present Value 21 NPV Cfwi I i i 1 (1 c ) n Cfw – cash-flow c .average cost of capital I .

make a recommendation whether the investment should be carried out or not.000 Euro.500 Euro.400 Euro. Knowing that the average cost of capital is 10%. using the NPV method.22 Example of a NPV Problem : A firm would like to make an investment worth of 10.000 USD after a period of 5 years at an interest rate of 7%.200. Cash-flow year two = 1.300 and Cash-flow year four 1. The managers estimated that the Cash-flow brought by this investment for a period of 4 years is: Cash-flow for the first year 1. Example of a FV problem: Using the compound interest. calculate the interest of 100. Cash-flow year three = 1. .

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