Financial Management

(Handout 3)
Huseynzade Jeyhun

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Apple case

1. Issued stock USD 300

2. Purchased iPods on credit for USD 2000
3. Sell iPods for USD 700 on credit (at cost of USD 600)
4. Pay USD 50 for dividends
5. Pay USD 200 in advance for advertisement (50 for current month)
6. Received USD 400 in advance for the iPod sale (unearned revenue)
7. Delivered USD 400 IPods to customer (reverse of unearned revenue)
8. Record cost of USD 150 for above USD 400 sale of Ipods
9. Incur USD 100 in wages not yet paid
10. Incur rent of USD 25 not yet paid
11. Sell USD 500 of Ipods in credit (record cost of USD 400 for the sold party)

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Apple case (Trial Balance)

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 Slow here….

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Income statement

Reports on a company’s performance over a period of time and lists amounts for
revenue and expenses.

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Income statement

Easiest way:

TV Program

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Balance sheet (Statement of financial
position)
 Summary of financial balances

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Balance sheet (Statement of financial
position)
 Easiest way to explain:

SELFIE !

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Statement of changes in equity

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Go back to Apple case (Trial Balance)

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Apple case (Income statement)

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Go back to Statement of changes in
equity

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Apple case (Retained earnings)

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Apple case (Balance Sheet)

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Apple case (Statement of changes in equity)
Contributed Capital Earned Capital Total Equity
Beginning balance $ 300.00 $ 300.00
Stock issuance $ 275.00 $ 275.00
Net income $ (50.00) $ (50.00)
Dividends
Ending balance $ 300.00 $ 225.00 $ 525.00

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Imputed cost

 Bank expects the payments to be returned

 Debtors expect money to be returned
 Shareholders expect money to be returned

WHAT IS WRONG IN STATEMENTS?

Serious confusion in the minds of

less knowledgeable observers
…Continuing imaging problem for
organization.
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Cash flow

• So many conflicting definitions:

Free cash flow=Free

Cash from operating
Net cash flow=Net cash available to
activities =Net cash
income +- Noncash owners and creditors
flow +- Changes in
items after investing
assets/liabilities
activity

Discounted cash
flow=Money today
having the same
value as a future
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stream of cash 2/28/2020 17

receipts
Cash flow Statement

Net cash flow=Net income +- Noncash items

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Cash flow statement

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Apple case (Cash flow statement)

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