Financial Accounting IAgenda for TodayAgenda for Today-IIWho am I?Self IntroductionSelf Introduction ContinuedSome Current ActivitiesTrends in Political EconomyImplications for Accounting & FinanceMore Implications for Acct. & FinanceQuestions or comments?What is an investor?InvestmentsSlide 14InvestIn other words...Financial Statement UsersSlide 18Slide 19Slide 20Other Statement UsersSlide 22Learning About InvestorsStock Investment StylesGrowth Stock InvestorsValue Stock PickersValue Stock Pickers (Cont.)Slide 28Users of statements haveComments or Questions?Today’s QuoteShifting GearsInvestor NeedsThe “Players”Roles in Financial ReportingSlide 36Your AgendaQuestions?Agenda: Wednesday, 3/26/2001Objectives of Financial ReportingSlide 41In other words,Profession of AccountingSlide 44The Professional ModelSubject Matter of A&MIS 521Slide 47Slide 48Slide 49How to Succeed in AccountingSlide 51What else can you do?PowerPoint PresentationA&MIS 521 1Financial Accounting ISession 1 – March 26, 2001Professor William F. BentzFisher College of BusinessA&MIS 521 2Agenda for Today•Introduce myself•Outline the major global forces shaping your career opportunities and what we do in this class•Outline the primary users of financial statements and their needs for information•Distribute syllabus and talk about course requirementsA&MIS 521 3Agenda for Today-II•Complete an information form•Review subject matter of A&MIS 521A&MIS 521 4Who am I?A&MIS 521 5Self Introduction •Education - B.A. (Economics-Cincinnati), MAcc., Ph.D. (OSU)•Employed by Hopewell Dairy, Inc., The Austin Co., Ralston Purina Co., Pickerington Creamery, Inc., General Motors Corp., Ernst & Ernst, University of Kansas, University of Oklahoma, and The Ohio State University. ~A&MIS 521 6Self Introduction Continued•Certified Public Accountant•Active in the American Accounting Association, Financial Executives Institute, Institute of Management Accountants, and other professional committees.•Research in linear planning and control system modelsA&MIS 521 7Some Current Activities•Board of Columbus Chapter of Financial Executives Institute•Past Chair of State Board of Accountancy Scholarship Advisory CommitteeA&MIS 521 8Trends in Political Economy•Technology revolution•Globalization of business•Global markets are increasingly competitive•Demographic shifts in the work force and marketplace•Privatization of large enterprises•Increasingly democratic institutionsA&MIS 521 9Implications for Accounting & Finance•The automation of information systems has changed the nature of accounting and the other business functions.•Even new employees must interact with many levels of management early in their careers.A&MIS 521 10More Implications for Acct. & Finance•The ability to use technology is now a required skill.•The mix of accounting and finance positions has changed.•Consulting & outsourcing continue to fuel the growth of specializationA&MIS 521 11Questions or comments?A&MIS 521 12What is an investor?Invest--to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.Webster’s DictionaryA&MIS 521 13Investments•Is a certificate of deposit at a bank?•Is a money market checking account an investment?•Is a life insurance policy an investment?•Is a non-interest bearing account an investment?A&MIS 521 14Investments•Is a residence also an investment?•Is an education an investment?•Is a small business an investment?•Is a lottery ticket an investment?A&MIS 521 15Invest“To put (money) to use,by purchase or expenditure,in something offering potential profitable returns, as interest, income, or appreciation in value.” The Random House Dictionary of the English Language (2nd edition)A&MIS 521 16In other words...•Commitment of resources with economic value (e.g., cash, land, buildings, equipment, vehicles, etc.)•Expected benefits (probability  amount):–Income (revenues - expenses)–Gains from appreciation in value (sale value minus cost)–Cost savings (current costs - proposed costs)A&MIS 521 17Financial Statement Users•Equity investors–Individual investors•Individual Retirement Accounts (IRAs)•Brokerage accounts & mutual funds•Direct investments in companies–Venture capitalistsA&MIS 521 18Financial Statement Users•Equity investors (continued)–Institutional investors•Insurance companies•Retirement funds (private and public)•Mutual fund providers•Real Estate Investment Trusts•Banks•Other corporationsA&MIS 521 19Financial Statement Users•Debt investors (lenders)–Individual investors•Savings accounts and certificates of deposit•Individual Retirement Accounts (IRAs)•Brokerage accounts•Mutual fundsA&MIS 521 20Financial Statement Users•Debt investors (continued)–Institutional investors•Insurance companies•Retirement funds (private and public)•Mutual fund providers•Real Estate Investment Trusts•Banks•Other corporationsA&MIS 521 21Other Statement Users•Customers–Individuals–Companies–Professional service firms•Suppliers•EmployeesA&MIS 521 22Other Statement Users•Government–Internal Revenue Service–Federal Trade Commission–Council of Economic Advisors–Federal Reserve SystemA&MIS 521 23Learning About InvestorsAccounting exists to provide information to manage the operations of enterprises and to report the results of those operations to interested parties. So let’s consider some of the basics about different classes of external investors.A&MIS 521 24Stock Investment Styles•Stock pickers–Growth stocks–Value stocks•Market timers•Index investorsA&MIS 521 25Growth Stock Investors•Look for consistent growth in earning per share, total net income, revenue or market share•Hope to find “growth” stocks before others do•Momentum investors looking for increasing rates of high growth•Higher growth rates justify higher pricesA&MIS 521 26Value Stock Pickers•Look for stocks undervalued by the market at the moment•Example--natural resource companies with valuable assets not valued at market•Example--cyclical companies•Example--stocks of good companies that may be out of favor for awhileA&MIS 521 27Value Stock Pickers (Cont.)•Measures of value include Price-Earnings Ratios (current price per share /earnings per share)•Evidence of unrecorded liabilities (environmental damage, unfunded