ETHICAL AND PROFESSIONAL Bure = |p Rina hee (nner jy 7 << Icy fia Me Nice ep arson ete hate Pose Epa Bes nd Ca Sy Soeereeeee Rect eCity Dain Loyalty se ‘iin Compra regenera 5 ferme ieprion Eee Aah ocdidn, ioe Sind exon Catan naan oe pas Coca tae Braet Cie Pee tenons Neier i 44 cP nae chiro GHA Candie vac oy Sra est tan LG neces ieee Saipuio d Gi Popa COTTA Simpl Liner Repenion Contin = a Tella) = store (02 t= Mie? binaediipeadiine 2 ‘Escimared imercepe: by = Vi, Confidence inter for pedicel Yoo: Ye Sh offre Mukiple Regression (bu) +(bs»%s) +Ho,2%u) #5 + Tox ssa pileane fb Heb = 0 c= ockotat “Reject if fel > critical cor povaliae Satna: La kbytes * “Aduintenite pilelons tb preset + Id er Fg the cou Clasications of Regulators Cambie government gece o independ, 1 Indgpendcnsreplor canbe SRO or om SRO, ‘SAF Regulation in Financial Markets Romer serene a en ee Economic Rational for Regulatory Intervention Ifans an the pecs of Jnfomacon amen + sete el wth vin of publi gods. Regulator Interdcpendecis and Thee Es Relay apa ory Regatory by = infer or eon by nur bing gute i Exploing rly fees eects cree bseecs sad beepenton of epson “Tool of Regalatry Intervention + Picemeanlens ening or rqelig can sci, and ponaon of pbc pods Seana of pre pos. Regulations Covering Commerce + Grspany axe corel competion leaning key an ops ee ‘anil mares pt Sek protect inven and wo cues of franca sen. ‘Sia math rain ncade oe requirement agency tance, anc epdatons wo prteranal ner ‘rene xeon: Moin isons 0 tee tend isn prota nex: Anticompetie Behaviors and Antirst Las = Dstminatory rng, bung exci igi ibn + Meeps eligi master da oct ‘empl bn: Cs toe ope ove rims the private bein fein, Sovet daer Rese cine sno be rete ele the elation eed Ae eS NESE LIFO/EIEO ‘As compared to LIFO, FIFO results in: Lower COGS, Higher ence. Higher nt income Higher inventory alae. Lower cash flow (more tn). Higher nct and gros margins. Higher caren a. Lowe inventory turore. Lome deo ay LIFO to FIFO. “Toadjust LIFO Femi nani statemens v9 FIFO: 1 Add the LIFO reserve to current at (ending Invent), + Subuact he iname anes onthe LEO reserve fom cuentas (cs). 1 Add LIFO reserve, net of tax, 1 sharholdes’ Depreciation Analysis -Avcrage ae Gn je) = accumu depen | ‘nal destin aves ‘sage presales cain pro iene anol desi pene, Rernning cl fe nding et nen annul depen epee “Accounting fr IntrorporteIavextnents Invesmen in Financial Aner 20% owned, 0 sigan flee. Helos tc on Stern ‘ale pos on US. + Andel cM i iil nd Toss inequity on WS, dividends reali etl on US. + Hedboruaing a FMV dividend, ince sali and weal! gions on 1. + Dest ui value ld for wading, Investments in Aint 20-50% owe influence Wik equiy mend rosa shre af the lave cringe. BS te aca 1. ree doesn cc Busines Combinations 380% ond or ‘Aspe td mee ander 1 CAA and TERS. Goodwill na amore jet 0 ‘Sena inpamen et Alles fib we Be ‘0 of combined with pen, ing inercom, ns I «100% mors fer as for share no owncd sine Venue 30% shared contol: Equity method. Financial Effet of Choice of Method ui acquit, & proprdonate conan: Aller methods cpr sme ne ncome + sets bi ls ar higher under segusion compa othe ety nethod. Difeeaces erwen IFRS and US. GAAP tweatment of ntereneporae investments inde: Unni EX pains and loses on ssl: sce secur ogi on income sateen liner IFS anda OCI unde U.S. GAAP ES tA gels ake coe ss marr sauitons or coalitions IFRS oer ot dings ere combi ype + TERS permis cece partial goodwill or “fll god” methods to vale ool and soncoling ier US. GAAP requ che fulgpoll method. Eng iva VIE any of the flowing: + Toi ai eu invesinent + SIhlackdecion making + Sino nor abr ose + Sih do no recive esl bent “The primary bene cosas he VIE Penson Accounting + PHO component current seve cries cos uation pu Balance Shest 1 Tunas = pla ai PRO = lace shot ss (ibiiy) under GAAP ad IFRS. Income Satement + ol peri pension cot (andes both HFRS an GAAP) ~eoniboone~ 3 Finded aie + IFRS and GAAP fron where the person cose ‘nrc (income staement ws. OCD) + Under GAAR rp peso expe = eve cont nese s mordouion of atari (it) and bes» aortaion of pst erie cove expec urn on plan set Under IFRS, reported pension expense = service ity pas sry ce net ete expe + Under IRS, dicount ate» expected et of return fon plan asses Neier expense = discount rate 2 ginning funded sans funded seus was pose 2 net incr income would be recognized. (Cash Flowe Adjustment otal pension cost «fm cotebuiondliferenee = Ain PHO (relay diference form CTF 0 CFO afr) Io pension cont > firme contribution, diff» bomowing (reas difference fiom CFO CEF aft). ‘Maltnational Operations: Choice of Method ForselFconained ub, functional # pesenction arene: use alheuteat method: © Adsetibilis at curentat, + Common stock at hori rte i isatbe nat taratrage * Exposure = sharcholde equi, * Dividend at ate when pai, Forinneraed au, funcional = preseneion carency use temporal methods * Moncary asclabities at cutee rte. + Nonmonctry ss labile at hina et * Sales SGA st verge rte, * COGS, deprecation at historical rte Exposure» monetary ses ~ monetary libs, [Net ase poston & dep fori cuteny = bs. [Net ia, postion & dee foreign curency = gin Original F/S vs. All Current 4 Pace BS and 5 rior unchanged + IFLC depreciating rani mie ratios will be + IFLC appreciating, eansted mixed ratios will be smalee ‘Hyperinflation: GAAP vs. TERS ype» 100% ont 3 yo GAAP ‘remporl method IFRS eae cn Core foal 2nd, aa withalcurene Net arch, power gif reported in income. ‘eer ase Tacomer acu pat les peiene ‘han ask pre “Measures of earings quality: () = bewer) Acca!’ = NOApxp = NOA aes puasts _ (NOAixp -NOAwc) sail (NOmaxpe NOAgea)/2 (xt co - cn) (WOK! NOR 2 ‘Mean Reversion: our ster with ger scr mings component Accruals Ratio Wane Copia Budgeting Expuion Trial ouday» FCInv + Clow + CE=G-C-DMt-1)+D= (Sit) +DT + TNOGE «Sal, +NWClnv TIS, 8). Capital Budgeting Replacement + Same a expansion sept curent ar tax sage ‘fold ass educa outlay + Incremental depreciation isin depth. Evaluating Projects with Unequal Lives + Least common multiple oflves method. + Equivalene annual amity (EAA) methods annuity w! PV equal o PV of project cash lows. te ne poEffects of Infiation * Discoune nominal el) ash lows t nominal (eal rate: unexpected changin inflation affect project praia: edocs the le ‘ving fom depreciation; decrees vale oF fied payments to bondholders fete cove and evens diferent (Capital Rationing + Tepostive NDV projects > available cpt chose the combination with the highest NPV. Real Options + Timing, abandonment, expansion, ex fundamenal options. Beonomie and Accounting Income + Econ ine = AT CF + Ain projects MY. * Boon dip based Gn Aa estments MV. * beam incomes closed hore intrest expense {ox of capital reed in dnc rt) + Accounting income = revenues ~ expenses + Ae, dep based on orginal investment cot. + Incr (financing costs) deduct before caledting accounting income, Valuation Models + Econ, pro» NOPAT ~ $WACC: discounted at WAC, eae ese eet ee ‘counted se fell tin oo + Chums vation separates CPs based on equity dams (counted 2 cot of equity) and debe holders dicount cst of deb. [MM Prop (No Taxes): epi servctre relevant (no eee tine, or bankrupecy co). MAM Prop II (No Taxes increased we of cheaper Ache ncreses ce af eq nochange in WAC MM Proposicion (Wh ase) tx sie adds ‘ale, vale maxed ¢ 100% deb. MM Proposition (With Taxes: ex shield adds sale, WACC minimized at 100% dee. Investor Preference Theories 1 MMs dividend inleanee theory Ina nova no-fe world, dividend poiyisirelean because fnvewor can erie a homemade dividend + Dividend preference theory sys investor prefer the ceaigy of current cash to fue capil gains. + Toeatenionsheane Instore are ta ner 6 vided; prefer comps buyback shares. Effecive Tax Rate om Dividends Danbleeationo spit rate sss ff ate = compat + (1~ corp. tend td) pation syste ve a ates the sharclde invita ete Signaling Effects of Dividend Changes iat ergs eee Therapie ig Dara negate ial uns management sees many profile invent opportuni. ‘When the stock goes ecdivdend: ‘ap DUT) (Tec) “Tange Payout Ratio Adjanement Model Ifcompany earings are expected to increase and the cueene payout ati blow the age your Faia te aya ae nec mca ronda (GE) iviend ee eae (me mers | (aio) ¢ Ber Dividend Coverage Ratios