Introduction 1. Understanding Financial Statements - Who must produce them, whom they serve; the role of auditors - The Balance Sheet - The Income Statement - The Cash Flow Statement 2. Finding Meaning in Financial Statements - Profitability ratios - Operating ratios - Leverage ratios - Solvency and debt ratios - Common size financial statements - From Financial measures to a Balanced Scorecard 3. Key Accounting Concepts (adapted from HBS course materials) The role of accounting in financial management - accrual versus cash accounting - accounting for inventories - depreciation and its methods - the recognition of revenues and expenses - the principle of historical cost and its implications - accounting values versus real economic values - activity based costing 4. Business Taxes - taxes and business decisions - taxes and the different legal forms of business - tax rates 5. Where the Money Comes From - Financing over the life cycle of enterprise. Create a little history of our example company (Amalgamated Hat Rack), explaining how it started small and was financed from the entrepreneur's personal savings, how it financed continued growth with bank loans, and then accessed public capital markets through an initial public offering of shares. Public floated debt financing followed as the company grew its physical asset base. - financing short-term assets (operations, retained profits, supplier credit, bank loans etc) - financing long-term assets (bonds, the different classes of equity) 6. Budgeting - Will pick up most of the HMM content from the "budgeting" module 7. Practical Tools for Business Decisions - A - Breakeven Analysis (fixed and variable costs) - Return on Investment (ROI) and Payback Period - Estimating Nonquantifiable Benefits and Cost - Leasing vs Owning decisions - Activity-based costing 8. Practical Tools for Business Decisions - B - The Time Value of Money - Net Present Value and Internal Rate of Return - EVA -what it means and how it's used 9. Valuation Concepts for Businesses Asset-based value measures - book value - adjusted book value - liquidation value (firesale or leisurely liquidation) Earnings-based value measures - P/E - net present value Glossary of financial terms
