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UCLA ECON 106F - Econ 106F Chapter 2 final

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Slide 1Chapter OutlineLearning ObjectivesLearning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives2.1 Firms’ Disclosure of Financial Information2.1 Firms’ Disclosure of Financial Information (continued)2.1 Firms’ Disclosure of Financial Information (continued)2.2 Balance Sheet2.2 Balance Sheet (continued)2.2 Balance Sheet (continued)Slide 142.2 Balance Sheet (continued)2.2 Balance Sheet (continued)2.2 Balance Sheet (continued)Slide 182.2 Balance Sheet (continued)2.2 Balance Sheet (continued)2.2 Balance Sheet (continued)2.2 Balance Sheet (continued)Textbook Example 2.1Textbook Example 2.1 (continued)2.3 Income Statement2.3 Income Statement (continued)2.3 Income Statement (continued)2.3 Income Statement (continued)2.3 Income Statement (continued)Slide 302.3 Income Statement (continued)2.4 Statement of Cash Flows2.4 Statement of Cash Flows2.4 Statement of Cash Flows (continued)2.4 Statement of Cash Flows (continued)Slide 36Textbook Example 2.2Textbook Example 2.2 (cont'd)2.5 Other Financial Statement Information2.5 Other Financial Statement InformationExample 2.3Example 2.3Example 2.32.6 Financial Statement Analysis2.6 Financial Statement Analysis (continued)2.6 Financial Statement Analysis (continued)Figure 2.1 EBIT Margins for Four U.S. Airlines2.6 Financial Statement Analysis (continued)Alternative Example 2.4Alternative Example 2.4 (cont'd)Alternative Example 2.4 (cont'd)2.6 Financial Statement Analysis (cont'd)2.6 Financial Statement Analysis (cont'd)2.6 Financial Statement Analysis (cont'd)Alternative Example 2.5Alternative Example 2.5 (cont'd)2.6 Financial Statement Analysis (cont'd)2.6 Financial Statement Analysis (cont'd)2.6 Financial Statement Analysis (continued)Example 2.6Example 2.6 (continued)Example 2.6 (continued)Example 2.6 (continued)Example 2.6 (continued)Example 2.6 (continued)Example 2.6 (continued)Example 2.6 (continued)2.6 Financial Statement Analysis (continued)Example 2.7Example 2.7 (continued)Example 2.7 (continued)2.6 Financial Statement Analysis (continued)Example 2.8Example 2.8 (continued)Example 2.8 (continued)Example 2.8 (continued)2.8 Financial Reporting in PracticeDiscussion of Key TopicChapter QuizTable 2.4 A Summary of Key Financial RatiosSlide 81Chapter 2Introduction to Financial Statement AnalysisCopyright ©2014 Pearson Education, Inc. All rights reserved.Chapter Outline2.1 Firms’ Disclosure of Financial Information 2.2 The Balance Sheet 2.3 The Income Statement2.4 The Statement of Cash Flows 2.5 Other Financial Statement Information2.6 Financial Statement Analysis 2.7 Financial Reporting in PracticeCopyright ©2014 Pearson Education, Inc. All rights reserved.Learning Objectives1. List the four major financial statements required by the SEC for publicly traded firms, define each of the four statements, and explain why each of these financial statements is valuable.2. Discuss the difference between book value of stockholders’ equity and market value of stockholders’ equity; explain why the two numbers are almost never the same.Copyright ©2014 Pearson Education, Inc. All rights reserved.Learning Objectives3. Compute the following measures, and describe their usefulness in assessing firm performance:• debt-equity ratio• enterprise value• earnings per share (EPS)• operating margin• net profit margin• accounts receivable days & accounts payable days• inventory days• interest coverage ratio• return on equity (ROE)• return on assets• price-earnings (PE) ratio• market-to-book ratioCopyright ©2014 Pearson Education, Inc. All rights reserved.Learning Objectives4. Discuss the uses of the DuPont identity in disaggregating ROE, and assess the impact of increases and decreases in the components of the identity on ROE. 5. Describe the importance of ensuring that valuation ratios are consistent with one another in terms of the inclusion of debt in the numerator and the denominator.Copyright ©2014 Pearson Education, Inc. All rights reserved.Learning Objectives6.Distinguish between cash flow, as reported on the statement of cash flows, and accrual-based income, as reported on the income statement; discuss the importance of cash flows to investors, relative to accrual-based income. 7.Explain what is included in the management discussion and analysis section of the financial statements that cannot be found elsewhere in the financial statements.Copyright ©2014 Pearson Education, Inc. All rights reserved.Learning Objectives8. Explain the importance of the notes to the financial statements.9. List and describe the financial scandals described in the text, along with the new legislation designed to reduce that type of fraud.Copyright ©2014 Pearson Education, Inc. All rights reserved.2.1 Firms’ Disclosure of Financial Information•Financial Statements–Firm-issued accounting reports with past performance information–Filed with the SEC•10Q–Quarterly •10K–Annual–Must also send an annual report with financial statements to shareholdersCopyright ©2014 Pearson Education, Inc. All rights reserved.2.1 Firms’ Disclosure of Financial Information (continued)•Preparation of Financial Statements–Generally Accepted Accounting Principles (GAAP)–Auditor•Neutral third party that checks a firm’s financial statements•Intended to remove COI from the process and create confidence in the financial dataCopyright ©2014 Pearson Education, Inc. All rights reserved.2.1 Firms’ Disclosure of Financial Information (continued)•Types of Financial Statements–Balance Sheet–Income Statement–Statement of Cash Flows–Statement of Stockholders’ EquityCopyright ©2014 Pearson Education, Inc. All rights reserved.2.2 Balance Sheet•A snapshot in time of the firm’s financial position•The Balance Sheet Identity:•Assets–What the company owns•Liabilities–What the company owes•Stockholder’s Equity–The difference between the value of the firm’s assets and liabilitiesCopyright ©2014 Pearson Education, Inc. All rights reserved.2.2 Balance Sheet (continued)•Assets–Current Assets: Cash or expected to be turned into cash in the next year•Cash •Marketable Securities•Accounts Receivable•Inventories•Other Current Assets–Example: Pre-paid expensesCopyright ©2014 Pearson Education, Inc. All rights reserved.2.2 Balance Sheet (continued)•Assets–Long-Term Assets•Net Property, Plant, & Equipment (PPE)–Depreciation (and Accumulated Depreciation)–Book Value = Acquisition


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UCLA ECON 106F - Econ 106F Chapter 2 final

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