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Business Financial Performance Financial Cash Flow vs. Accounting Cash Flow DrBaranes

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Business Financial Performance Financial Cash Flow vs. Accounting Cash Flow DrBaranes

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    1. Business & Financial Performance Financial Cash Flow vs. Accounting Cash Flow www.DrBaranes.com Dr. Amos Baranes PhD, CPA

    2. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    3. Finance & Business Performance Dr. Amos Baranes PhD, CPA The study of corporate finance capital budgeting - In what long-lived assets should the firm invest? capital structure - How can the firm raise cash for required capital expenditures? net working capital - How should short-term operating cash flows be managed?

    4. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    5. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    6. Finance & Business Performance Dr. Amos Baranes PhD, CPA Crisis Demands New CFO Skills A marked shift in companies' CFO preferences began to take shape in late 2007 and early 2008, he noted, away from the certified public accountant and controller background. Depending on the company, in greater demand now are MBAs, with their broader education and finance perspective, and people with treasury or financial analysis backgrounds. "The pendulum swung to the controllership skill set with Sarbanes-Oxley, and now it may be that treasurers are going to have their day in the spotlight."

    7. Finance & Business Performance Dr. Amos Baranes PhD, CPA Accounting Profit vs. Cash Flows The Midland Company had acquired gold for $900,000 in cash and sold it for $1 million for credit.

    8. Finance & Business Performance Dr. Amos Baranes PhD, CPA Cash Flow Timing

    9. Finance & Business Performance Dr. Amos Baranes PhD, CPA Risk

    10. Finance & Business Performance Dr. Amos Baranes PhD, CPA legal forms of organizing firms The Sole Proprietorship The Partnership General Limited The Corporation ownership can be readily transferred The corporation has unlimited life The shareholders’ liability is limited limited liability company (LLC).

    11. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    12. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    13. Finance & Business Performance Dr. Amos Baranes PhD, CPA The Goal of Financial Management Survive. Avoid financial distress and bankruptcy. Beat the competition. Maximize sales or market share. Minimize costs. Maximize profits. Maintain steady earnings growth. What is the appropriate goal when the firm has no traded stock? As long as we are considering for-profit businesses, only a slight modification is needed. The total value of the stock in a corporation is simply equal to the value of the owners’ equity. Therefore, a more general way of stating our goal is as follows: Maximize the market value of the existing owners’ equity.What is the appropriate goal when the firm has no traded stock? As long as we are considering for-profit businesses, only a slight modification is needed. The total value of the stock in a corporation is simply equal to the value of the owners’ equity. Therefore, a more general way of stating our goal is as follows: Maximize the market value of the existing owners’ equity.

    14. Finance & Business Performance Dr. Amos Baranes PhD, CPA The Agency Problem and Control of the Corporation Agency Relationships - exists whenever someone (the principal) hires another (the agent) to represent his or her interests. Do Managers Act in the Stockholders’ Interests?

    15. Finance & Business Performance Dr. Amos Baranes PhD, CPA Financial Markets The Primary Market: New Issues Secondary Markets Dealer markets (OTC) and auction markets Trading in Corporate Securities NYSE NASDAQ AMEX Tokyo Stock Exchange (TSE) London Stock Exchange (LSE) …….

    16. Finance & Business Performance Dr. Amos Baranes PhD, CPA Listing Stocks that trade on an organized exchange are said to be listed on that exchange. Listed companies face significant disclosure requirements. In response to corporate scandals at companies such as Enron, WorldCom, Tyco, and Adelphia, Congress enacted the Sarbanes-Oxley Act in 2002.

    17. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    18. Finance & Business Performance Dr. Amos Baranes PhD, CPA Financial Statements Balance Sheet Income Statement Statement of cash flow Change in Retained earning (Change in equity) From these statement we are going to create statement of Financial Cash Flow

    19. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    20. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    21. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    22. Finance & Business Performance Dr. Amos Baranes PhD, CPA We want to explain the change in the cash in equivalent – Accounting cash flow. We want to explain the net outflow to the debt and equity holders – Financial cash flow.We want to explain the change in the cash in equivalent – Accounting cash flow. We want to explain the net outflow to the debt and equity holders – Financial cash flow.

    23. Finance & Business Performance Dr. Amos Baranes PhD, CPA Note the change in the Accumulated retained earning is = net income - dividend Note the change in the Accumulated retained earning is = net income - dividend

    24. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    25. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    26. Finance & Business Performance Dr. Amos Baranes PhD, CPA Let look at the Financial cash flow. First what is this number $238?Let look at the Financial cash flow. First what is this number $238?

    27. Finance & Business Performance Dr. Amos Baranes PhD, CPA $238 is left to distribute to the debt and share holders.$238 is left to distribute to the debt and share holders.

    28. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    29. Finance & Business Performance Dr. Amos Baranes PhD, CPA

    30. Finance & Business Performance Dr. Amos Baranes PhD, CPA Excel – Vector method Please review the excel for this presentation and try to understand all the links between all the financial statements. See www.DrBaranes.com - CashFlow.xls

    31. Finance & Business Performance Dr. Amos Baranes PhD, CPA END Thanks For Participation

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