1. The Statement of Cash Flows
1.1. shows the firm’s cash inflows and outflows from operations as well as from its investments and financing activities
1.1.1. • Cash outflow is equal to the cost of goods sold, which is shown in the income statement, plus the change in inventories. • Cash inflow is equal to the sales shown in the income statement less the change in uncollected bills.
1.2. Free Cash Flow
1.2.1. The value of a company depends on how much cash it can generate for investors after it has paid for any new capital investments, is available to be paid out to investors as interest or dividends or to repay debt or buy back stock.
2. Accounting Practice and Malpractice
2.1. Accounting practice is the process and activity of recording the day-to-day financial operations of a business entity. Accounting practice is necessary to produce the legally required annual financial statements of a company.
2.2. Accounting malpractice is an accountant's error, omission or deviation from Generally Accepted Accounting Principles (GAAP) resulting in financial loss. Auditing malpractice, similarly, is an auditor's error, omission or deviation from Generally Accepted Auditing Standards (GAAS) resulting in financial loss.
2.2.1. Forms: • Simple negligence includes errors that an average accountant would not commit • Gross negligence includes serious errors that deviate significantly from accounting standards
3. Taxes
3.1. Taxes are mandatory contributions levied on individuals or corporations by a government entity whether local, regional, or national
3.1.1. Corporate tax is an expense of a business (cash outflow) levied by the government that represents a country’s main source of income
3.1.2. Personal income tax is a type of tax governmentally imposed on an individual’s income, such as wages and salaries
4. What Is Financial Accounting
4.1. Is the process of preparing financial statements that companies use to show their financial performance and position to people outside the company, including investors, creditors, suppliers, and customers.
5. The Balance Sheet
5.1. A balance sheet is a financial statement that reports a company's assets, liabilities, and shareholder equity. The balance sheet is one of the three core financial statements that are used to evaluate a business. It provides a snapshot of a company's finances (what it owns and owes) as of the date of publication.
5.1.1. Components
5.1.1.1. • Capital and Equity • Assets • Liability
5.2. Book Values & Market Values
5.2.1. - Book Value (Net worth of the firm according to the balance sheet) - Market Value (The Firm's worth based on the total value of its outstanding shares in the market, which is its market capitalization(
5.2.1.1. • Book values are based on historical or original values. • Market values measure current values of assets and liabilities.
6. The Income Statemen
6.1. Financial statement that shows the revenues, expenses, and net income of a firm over a period of time
6.1.1. Common-size income statement
6.1.1.1. All items on the income statement are expressed as a percentage of revenues.