Professional Documents
Culture Documents
BUS1100E L5 Business Finance
BUS1100E L5 Business Finance
Source: Ebert, R. J. & Griffin, R. W. (2020) Business Essentials (12th ed.). Pearson Education.
▪ Understand the difference between financial and
managerial accounting.
2
▪ Financial Accounting: field
of accounting concerned with
external users of a company’s
financial information.
▪ Managerial (Management)
Accounting: field of
accounting that serves
internal users of a company’s
financial information.
Source: https://resources.tallysolutions.com/us/wp-content/uploads/2021/08/financial-
accounting-vs-managerial-accounting-difference-definition.jpg
3
▪ Financial Statement:
any of several types of
reports summarizing a
company’s financial
status to stakeholders
and to aid in
managerial decision
making.
Source: https://st2.depositphotos.com/4428871/7729/i/950/depositphotos_77293918-stock-photo-financial-
statements.jpg
4
▪ Balance Sheet:
financial statement
that supplies detailed
information about a
firm’s assets,
liabilities, and owners’
equity.
5
Types of assets:
1. Current Asset: asset that can or will be converted
into cash within a year.
▪ Liquidity: ease with which an asset can be
converted into cash.
7
▪ Income Statement
(Profit-and-Loss
Statement): financial
statement listing a firm’s
annual revenues and
expenses so that a
bottom line shows
annual profit or loss.
▪ Profit(or Loss) =
Revenues – Expenses
8
1. Revenues: funds that flow into a business
from the sale of goods or services.
2. Cost of revenues: costs that a company
incurs to obtain revenues from other
companies.
▪ Cost of goods sold: costs of obtaining
materials for making the products sold
by a firm during the year.
3. Gross Profit: preliminary, quick-to-
calculate profit figure calculated from the
firm’s revenues minus its cost of revenues
(the direct costs of getting the revenues).
Source: https://blog.mint.com/wp-content/uploads/2020/01/HEADER-
3.jpg?w=653&h=352&crop=1 9
4. Operating Expenses: costs,
other than the cost of revenues,
incurred in producing a good
or service.
5. Operating Income: gross
profit minus operating
expenses.
6. Net Income (Net Profit or Net
Earnings): gross profit minus
operating expenses and
income taxes.
Source: https://youberelentless.com/wp-
content/uploads/2018/11/what-is-annual-income.jpg
10
▪ Statement of Cash
Flows:
financial statement
describing a firm’s yearly
cash receipts and cash
payments.
11
1. Cash Flows from Operations
▪ concerns main operating activities: cash transactions
involved in buying and selling goods and services.
2. Cash Flows from Investing
▪ reports net cash used in or provided by investing. It
includes cash receipts and payments from buying and
selling stocks, bonds, property, equipment, and other
productive assets.
3. Cash Flows from Financing
▪ reports net cash from all financing activities. It
includes cash inflows from borrowing or issuing
stock, as well as outflows for payment of dividends
and repayment of borrowed money.
12
Source: https://capital.com/files/imgs/glossary/750xx/5-Cash-flow_1.jpg
Budget: detailed statement of
estimated receipts and
expenditures for a future
period of time.
Source: https://miro.medium.com/max/1100/1*vtlcZP9KBNAgiZmHcMpsZg.png
15
Angel Investors and Venture
Capital
▪ Angel Investors: outside
investors who provide new
capital for firms in return for a
share of equity ownership.
▪ Venture Capital: private funds
from wealthy individuals seeking
investment opportunities in new
growth companies.
Source: https://assets.entrepreneur.com/content/3x2/2000/20151125052533-shutterstock-199610807.jpeg
16
Sale of Corporate Bonds
17
Characteristics of Corporate Bonds:
▪ The bondholder (the lender) has no claim to
ownership of the company and does not receive
dividends.
▪ Interest payments and repayment of principal are
financial obligations; payments to bondholders have
priority over dividend payments to stockholders in
cases of financial distress.
▪ Bond Indenture: legal document containing
complete details of a bond issue.
▪ Maturity Date: future date when repayment of a
bond is due from the bond issuer (borrower).
▪ Face Value (Par Value): amount of money that the
bond buyer (lender) lent the issuer and that the
lender will receive on repayment.
Source:
https://www.schroders.com/pl/sysglobalassets/ 18
digital/insights/2020/hero-images/bond.jpg
▪ Financial Planning:
process of looking at
one’s current financial
condition, identifying
one’s goals, and
anticipating
requirements for
meeting those goals.
19
THE END.
20