Brigham michael c. The annual report is a report issued annually by a corporation to its stockholders. Net sales are shown at the top of each statement, after which various costs, including income taxes, are subtracted to obtain the net income available to common stockholders.
The bottom of the statement reports earnings and dividends per share. Note that retained earnings represents a claim against assets, not assets per se. Firms retain earnings primarily to expand the business, not to accumulate cash in a bank account. Depreciation is a non-cash charge against tangible assets, such as buildings or machines.
Amortization is a non-cash charge against intangible assets, such as goodwill. Operating current assets are the current assets used to support operations, such as cash, accounts receivable, and inventory.
It does not include short-term investments. It does not include notes payable or any other short-term debt that charges interest. Net operating working capital is operating current assets minus operating current liabilities. Total net operating capital is sum of net operating working capital and operating long-term assets, such as net plant and equipment.
Operating capital also is equal to the net amount of capital raised from investors. This is the amount of interest-bearing debt plus preferred stock plus common equity minus short-term investments. Net cash flow, as opposed to accounting net income, is the sum of net income plus non-cash adjustments. NOPAT, net operating profit after taxes, is the amount of profit a company would generate if it had no debt and no financial assets.
Free cash flow is the cash flow actually available for distribution to investors after the company has made all investments in fixed assets and working capital necessary to sustain ongoing operations.
It shows the rate of return that is generated by assets. Market value added is the difference between the market value of the firm i. If the book values of debt and preferred stock are equal to their market values, then MVA is also equal to the difference between the market value of equity and the amount of equity capital that investors supplied.
Economic value added represents the residual income that remains after the cost of all capital, including equity capital, has been deducted. Taxable income is defined as gross income less a set of exemptions and deductions which are spelled out in the instructions to the tax forms individuals must file. Marginal tax rate is defined as the tax rate on the last unit of income.
Average tax rate is calculated by taking the total amount of tax paid divided by taxable income. Capital gain loss is the profit loss from the sale of a capital asset for more less than its purchase price.
Ordinary corporate operating losses can be carried backward for 2 years or forward for 20 years to offset taxable income in a given year. Improper accumulation is the retention of earnings by a business for the purpose of enabling stockholders to avoid personal income taxes on dividends.
An S corporation is a small corporation which, under Subchapter S of the Internal Revenue Code, elects to be taxed as a proprietorship or a partnership yet retains limited liability and other benefits of the corporate form of organization.To browse Academia. Skip to main content. Log In Sign Up. Rt05mm 8d1ayk. The emphasis is on breadth, lightly touching a number of topics without going into a great deal of detail.
The chapter provides a foundation on which to base the more advanced work of later chapters. Financial Assets Distinguish financial assets from real assets and establish the basis of their value in future cash flows. Financial Markets Define financial markets as networks within which financial assets are traded. Describe the purpose of markets as transferring funds from investors to companies.
Raising Money Corporations raise money in financial markets to finance projects. Financial Management The role of financial management within companies including Treasury and Control functions and the responsibilities associated with each.
The Price of Securities - A Link Between the Firm and the Market The market price of securities provides a link between the activities of management and the players in financial markets.
The Importance of Cash Flow Cash is king in finance. How that perception differs from the accounting viewpoint. The Language of Finance Financial people need to know at least a little accounting because it's the system in which businesses "keep score.
Financial theory distinguished from everyday practice. The roots of financial theory in economics. The Proprietorship Form Easy to start, taxed just once. However, raising money for expansion is tough because no one wants to lend to new small businesses.
Van Horne:Fundamentals of Financial Management, 13th Edition
The Corporate Form Double taxation, but now the business can sell stock, which can give investors an incentive to put money into a new small business. The Truth About Limited Liability Limited liability works for an absentee equity investor, but rarely does small business owners much good because of personal guarantees and liability for negligence. S-Type Corporations and Limited Liability Companies The best of both worlds for small businesses, from the people who gave you the tax system.
Distinguished from maximizing profits. Conflicts of Interest - An Illustration Employees vs. Stockholders - A gym on the factory site. Management referees. The Agency Problem The special status of management and the opportunity to take advantage of it. Separate the following list of assets into real assets and financial assets.
What are the distinguishing characteristics of each type of asset? Financial assets are pieces of paper that provide a claim to future cash flows. What is the primary factor that determines the price of securities? Can you think of another factor that might significantly affect how investors value the first factor? Hence the primary determinant of price is what investors expect those cash flows to be. The second factor is risk. Some securities are volatile, and people understand that the cash flows coming from them may turn out to be a great deal more or less than originally expected.
These risky securities have less value than more stable issues with the same expected cash flows. Discuss the differences, similarities, and ties between finance and accounting. All records are stated in terms of the accounting system, so financial people have to be conversant with accounting. In finance, the emphasis is on cash flow, while accounting is more concerned with giving an overall portrayal of the firm's condition. Accounting is generally part of the finance department, but people commonly think of treasury functions as "finance" and separate from accounting.To browse Academia.
Skip to main content. Log In Sign Up. Some users of accounting information include managers, employees, investors, creditors, customers, and the government. The role of accounting is to provide information for managers to use in operating the business. In addition, accounting provides information to others to use in assessing the economic performance and condition of the business. The corporate form allows the company to obtain large amounts of resources by issuing stock. For this reason, most companies that require large investments in property, plant, and equipment are organized as corporations.
The business entity concept limits the recording of economic data to transactions directly affecting the activities of the business. This is consistent with the cost concept. An account receivable is a claim against a customer for goods or services sold.
An account payable is an amount owed to a creditor for goods or services purchased. Therefore, an account receivable in the records of the seller is an account payable in the records of the purchaser. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Problems - Chapter 4
Under the cost concept, the land should be recorded at the cost to Kountry Repair Service. Under the cost concept, the land should be recorded at the cost to Higgins Repair Service.
PE 1—2A a. Decreased PE 1—8B a. The accounting equation is relevant to all companies. It serves as the basis of the accounting information system. Oftentimes, disclosing only what is legally required may not be enough.
Increases assets and decreases assets. Increases assets and increases liabilities. Some transactions affect only one element of the accounting equation. For example, purchasing supplies for cash only affects assets. Balance sheet: 1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 13 Income statement: 5, 12, 14, 15 b. Yes, an item can appear on more than one financial statement. For example, cash appears on both the balance sheet and statement of cash flows.
However, the same item cannot appear on both the income statement and balance sheet. Yes, the accounting equation is relevant to all companies, including Exxon Mobil Corporation.
All financial statements should contain the name of the business in their heading. The heading of the balance sheet needs the name of the business. In the income statement, the miscellaneous expense amount should be listed as the last expense.
In the income statement, the total expenses are incorrectly subtracted from the sales commissions, resulting in an incorrect net income amount. Accounts payable should be listed as a liability on the balance sheet.View larger. Download instructor resources. Additional order info. Pearson offers special pricing when you package your text with other student resources. If you're interested in creating a cost-saving package for your students, contact your Pearson rep. We're sorry! We don't recognize your username or password.
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Bacon 5 Instructor's Resource Manual. Bacon 5 Test Bank.To browse Academia. Skip to main content. Log In Sign Up. Co Qfg7gf. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Lecture Suggestions Chapter 1 covers some important concepts, and discussing them in class can be interesting. However, students can read the chapter on their own, so it can be assigned but not covered in class.
We spend the first day going over the syllabus and discussing grading and other mechanics relating to the course.
Solution Manual for Fundamentals of Financial Management 13th Edition by Horne
To the extent that time permits, we talk about the topics that will be covered in the course and the structure of the book. We also discuss briefly the fact that it is assumed that managers try to maximize stock prices, but that they may have other goals, hence that it is useful to tie executive compensation to stockholder-oriented performance measures.
If not, we ask students to read it on their own, and to keep them honest, we ask one or two questions about the material on the first exam. One point we emphasize in the first class is that students should print a copy of the PowerPoint slides for each chapter covered and purchase a financial calculator immediately, and bring both to class regularly.
Students will need to learn how to use their calculators before time value of money concepts are covered in Chapter 5. It is important for students to grasp these concepts early as many of the remaining chapters build on the TVM concepts.
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We are often asked what calculator students should buy. It can be estimated but not measured precisely. At any given time, most stocks are reasonably close to their intrinsic values and thus are at or close to equilibrium. However, at times stock prices and equilibrium values are different, so stocks can be temporarily undervalued or overvalued. Investor optimism and pessimism, along with imperfect knowledge about the true intrinsic value, leads to deviations between the actual prices and intrinsic values.
Intrinsic values are strictly estimates, and different analysts with different data and different views of the future will form different estimates of the intrinsic value for any given stock.
So, theoretically, it is better that the two be equal; however, intrinsic value is a long-run concept.
So, maximizing the intrinsic value will maximize the average price over the long run but not necessarily the current price at each point in time. However, the CEO would prefer that the market price be high— since it is the current price that he will receive when exercising his stock options. In addition, he will be retiring after exercising those options, so there will be no repercussions to him with respect to his job if the market price drops—unless he did something illegal during his tenure as CEO.
The compensation package should be sufficient to attract and retain the CEO but not go beyond what is needed. This means that options or direct stock awards should be phased in over a number of years so the CEO will have an incentive to keep the stock price high over time.FINANCE MANAGER Interview Questions And Answers (How To Become A Finance Manager!)
If the intrinsic value could be measured in an objective and verifiable manner, then performance pay could be based on changes in intrinsic value. However, it is easier to measure the growth rate in reported profits than the intrinsic value, although reported profits can be manipulated through aggressive accounting procedures and intrinsic value cannot be manipulated.
The advantages of the first two include the ease and low cost of formation. The advantages of corporations include limited liability, indefinite life, ease of ownership transfer, and access to capital markets. Limited liability companies and partnerships have limited liability like corporations. The disadvantages of a proprietorship are 1 difficulty in obtaining large sums of capital; 2 unlimited personal liability for business debts; and 3 limited life. The disadvantages of a partnership are 1 unlimited liability, 2 limited life, 3 difficulty of transferring ownership, and 4 difficulty of raising large amounts of capital.
The disadvantages of a corporation are 1 double taxation of earnings and 2 setting up a corporation and filing required state and federal reports, which are complex and time-consuming. Among the disadvantages of limited liability corporations and partnerships are difficulty in raising capital and the complexity of setting them up. Companies, and consequently the stockholders, prosper by management making decisions that will produce long-term earnings increases.
There has been much criticism in recent years that U. A prime example is the U. The compensation package should be sufficient to attract and retain able managers but not go beyond what is needed.Each excel link will download the file containing a spreadsheet for the problem and a template worksheet on which you can prepare the solution electronically. If you see a light bulb icon on a worksheet, just mouse over above the icon and a comment box will appear.
The comments include useful suggestions for improving your spreadsheet skills. You may not post or redistribute, electronically or otherwise, any solution material. Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found at our partner website Bookboon.
Video solutions to selected problems are available to students enrolling in the online course. The pdf version of the solutions manual also includes links to the video solutions. You can purchase the solutions manual in the bookstore. Problems - Chapter 4. Visit the Bookstore. Preparation of an adjusted trial balance. Preparing financial statements from an adjusted trial balance.
Temporary vs. The closing process. The accounting cycle. Reversing entries. Classified balance sheet. The complete accounting cycle. Steps in the Accounting Process. Reversing Entry Comprehension and Practice. Preparing a Classified Balance Sheet.