...Finance can be through of as the study of the following 3 questions: 1. In what long-term assets should the firm invest? (Capital budgeting) 2. How can the firm raise cash for required capital expenditures? (Capital structure) 3. How should short-term operation cash flows be managed? (Working capital management) Forms of business organization: * Proprietorship- single owner * Partnership- more than one owner * Corporation- legal entity separate and distinct form its owners and managers. * Corporations * Advantages: * Unlimited life- independent of owners * Ease transfer of ownership * Limited liability * Ease of raising capital * Disadvantages: * Double taxation * Cost of set-up and report filing Maximizing value * Limited liability- the lower the risk the higher the value, all else equal * Growth opportunities: corporations can raise capital easier to take advantage of these opportunities. * Liquidity: an asset value also depends on how easy it is to sell it. Management’s primary goal Our focus: profit, publicity held companies Management’s goal: maximize shareholder wealth, which translates into maximizing the stock price. Maximizing shareholder value: A company’s shareholder wealth is equal to the number of shrares outstanding times market value per share. * We need to know what factors affect the stock price. * The value of a share of stock is the present value...
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...US GAAP vs. IFRS The basics March 2010 Table of contents 2 5 7 8 11 13 14 16 18 20 26 28 31 33 35 38 40 42 43 44 46 47 Introduction Financial statement presentation Interim financial reporting Consolidations, joint venture accounting and equity method investees Business combinations Inventory Long-lived assets Intangible assets Impairment of long-lived assets, goodwill and intangible assets Financial instruments Foreign currency matters Leases Income taxes Provisions and contingencies Revenue recognition Share-based payments Employee benefits other than share-based payments Earnings per share Segment reporting Subsequent events Related parties Appendix — The evolution of IFRS Introduction It is not surprising that many people who follow the development of worldwide accounting standards today might be confused. Convergence is a high priority on the agendas of both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) — and “convergence” is a term that suggests an elimination or coming together of differences. Yet much is still made of the many differences that exist between US GAAP as promulgated by the FASB and International Financial Reporting Standards (IFRS) as promulgated by the IASB, suggesting that the two GAAPs continue to speak languages that are worlds apart. This apparent contradiction has prompted many to ask just how different are the two sets of standards? And where differences exist, why do they exist...
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...Finance: the study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial assets Financial Environment: encompasses the financial system, institutions or intermediaries, financial markets, business firms, individuals, and global interactions that contribute to an efficiently operating economy Financial Institutions: organizations or intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the funds in physical assets Financial Markets: physical locations or electronic forums that facilitate the flow of funds among investors, businesses, and governments Two Themes: Entrepreneurial Finance: study of how growth-driven, performance-focused, early-stage firms raise financial capital and manage operations and assets Personal Finance: study of how individuals prepare for financial emergencies, protect against premature death and property losses, and accumulate wealth Why Study Finance: to make informed economic decisions; to make informed personal and business investment decisions; to make informed career decisions based on a basic understanding of business finance Six Principles of Finance: Time Value of Money: understand the economic behavior of individuals and the economic decisions of the institutions and businesses that they run; principle pillar apparent in many of our day-to-day...
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...Real Assets vs. Financial Assets I. Real Assets a. Land, buildings, equipment and knowledge that can be used to produce goods and services b. Generate net income to economy II. Financial Assets a. Stocks and bonds b. Claims to the income generated by real assets c. Define the allocation of income or wealth among investors d. Investor’s returns come from the income produced by the real assets that were financed by the issuance of those securities Taxonomy of Financial Assets I. Fixed-income/ Debt a. Promise fixed stream of income or a stream of income that is determined to a specified formula b. Investment performance is lease closely tied to the financial condition of the issuer c. Money market is fixed income securities that are short term, highly marketable, and generally very low risk i. Ex: US Treasury bills or bank certificates of deposit (CDs) d. Capital market range from very safe to relatively risky i. Treasury bonds and bonds issued by federal agencies, state and local municipalities, and corporations II. Equity a. Represents and ownership share in the corporation b. Payments are not promised, dividends may be paid c. Value will increase if firm is successful, performance is tied directly to success of firm and its real assets- tend to be riskier III. Derivative securities (options and futures contracts) a. Provide payoffs that are determined by the prices of other assets such as bond or stock prices b. Used to hedge risks or transfer them Financial...
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...[pic] BB&T BANK ANALYSIS REPORT FINA 280 FINANCIAL INSTITUTION MANAGEMENT & MODELING William C. Handorf, Ph.D. June 28, 2008 Washington, DC Content 1. INTRODUCTION ………………………………………………..…………………3 2. BB&T ……………………….……………………………………………………….4 3. US ECONOMIC OVERVIEW ……………………………………………………12 4. BB&T Bank …………...……………………………………………………………14 5. Conclusion…………………………………………………………………………..41 6. Questions to Management………………………………………………………….42 1. INTRODUCTION The purpose of this report is to analyze the financial operations and financial conditions of BB&T Bank by evaluating financial, economic and market information available for the period from 2000 to 2008. This paper attempts to address key strengths and weaknesses of the bank from a regulatory, financial, and credit market perspective. In order to make assessments and calculate required ratios, statistics and correlations, we mainly review the Uniform Bank Performance Report (UBPR) of the bank and publicly available financial data. Besides BB&T Bank the paper also attempts to analyze the performance of the holding company, BB&T Corporation (NYSE: BBT). Section 2 briefly overviews the holding company - BBT - and its financial analysis. Section 3 provides an overview of the US economy as a backdrop to the financial performance of the bank. Section 4 uses the CAMELS methodology (Capital, Asset Quality, Management, Earnings, Liquidity and Sensitivity) to identify the key strengths and weaknesses...
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...large is the financial services industry (commercial banks, investment banking, insurance) as a proportion of the US Economy’s corporate assets? 10%? 20%? 50%? More? ~70% Why study commercial banks separate from other types of firms (Retail / Manufacturing)? Because commercial banks have some fundamental differences from non-financial firms: 1) Commercial banks have primarily financial assets; non-financial firms have primarily real assets 2) Because of the above, commercial banks are exposed to different types of risk than non-financials (some of which are related to banks’ financial assets, like interest rate risk and default risk.) 3) Commercial banks market products from BOTH sides of the balance sheet making it more difficult to balance their sources of funds (i.e., deposits) and uses of funds (new loans). Non-financials determine how much capital is necessary to purchase new assets and then (assuming the project is +NPV) determine how to fund the purchase. Big picture: How to non-financial firms earn profits? How to commercial banks earn profits? Commercial banks earn profits from generating higher levels of interest income and fee income than they incur in interest expense (paid on deposits and other liabilities) and operating costs. Non-financials earn net revenues generated from positive NPV investments, primarily in real assets Current Topics in the News… Bank Regulation and the Presidential Candidates: Sanders vs. Clinton vs. Republicans ...
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...IFRS vs. GAAP Introduction The U.S. GAAP is accounting principles adopted by the U.S Securities and Exchange Commission (SEC). Over time SEC has been talking about moving these principles over to the IFRS, The International Financial Reporting Standard. “IFRS is an accounting standard that was developed by a not-for-profit group called the International Accounting Standard Board. (www.Ifrs.com)” This summary will give you a subject by subject look of some differences and similarities both the IFRS and the GAAP carry. IFRS 2-1: In what ways does the format of a statement of financial or position under IFRS often differs from a balance sheet presented under GAAP? Accounting follows the double entry standard where transactions are broken down into sections, revenue or expenses, assets or liabilities. Under IFRS, it does not dictate a particular order of accounts on the statement of financial. Usually, companies report their assets in reverse order of liquidity. For example, you would start with long term assets and work your way down to current liabilities. Under GAAP, it requires that all accounts be in order of their liquidity. Cash is usually reported first and non- current assets would be listed last. With these differences financial reporting results would be different for companies. IFRS 2-2: Do the IFRS and GAAP conceptual frameworks differ in terms of the objective of financial reporting? Explain. No, IASB and FASB conceptual frameworks are organized in similar...
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...how much has already earned rather than how much mote they can earn. * It is used bcoz it imposed on decision makers by their environment. Eg: taxation decision n cost plus contract. ii. Historical cost is based on actual, not merely possible transaction. * Record done based on actual transactions made. * Ijiri- it possible to prepared a balance she on the basis of year-end market price without references to actual transactions. * Historical cost provides evidences for determining how efficiency management has meet their responsibilities. iii. Through history, FS based on historical cost have been found to be useful. * Mautz – “if whose who make management n investment decision had found financial reports based on historical cost useful over the years, changes in acctg would long since have been mad” iv. The best understood concept of profit is the access of selling price over historical cost. * People understand the basic notion of actual cost compared to the selling price as an access or profit. v. Acctg must guard the integrity of their data against internal modifications. * Historical cost is less subject to manipulation bcoz it is based on actual transaction occurred. vi. How useful is profit information based on current cost or exit price? * Current cost or exit price induce a short term view of profit. * But...
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...Foundation Paper Malik Harris University Of Phoenix Omega Health Foundation Paper The application of sound financial decision making and investment positioning is predicated upon a sound understanding of the critical components of how a business in the healthcare market behaves. The relationship between investment fundamentals, company positioning and the action process will facilitate the enabling of the organization to move forward on concrete financial footing. The ability to understand where a company is coming from in terms of a financial standpoint and making changes in the application of what current financial goals may be and calling to action the direction of where the company needs to go completes a skill set a financial manager must have. Current principles of finance and how they relate to the Omega Health Foundation in relation to their financial strength are as (Guin, None) follows: 1. Risk-Return Tradeoff – This principle demands that the higher or increased level of risk, the high the expected return must produce. Financial advisors must determine the level of risk an organization is willing to assume before investments can be properly executed. 2. Leverage – The simplest way to apply this principle is to magnify earnings that are the direct result of fixed costs. These magnifications can be realized by operational, financial and total or combined leverage. 3. Time Value of Money – Every penny earned or invested has a time value. Omega Health...
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...to financial institutions • Interest rate risks stems from the mismatching of the maturity (the main component of duration) of the assets and liabilities held by the FIs • Market risk: potential changes in the value of assets held by FIs • Credit risk: holding securities with the potential of default • Foreign exchange risks: FIs holding foreign currency or securities denominated in a foreign currency • Liquidity risk: cost associated with the ability to sell securities to raise cash Use of Economic transactions by FIs • Provide a center where savers meet borrowers • Provide economies of scale • Issue financial claims that are more attractive to the household savers than the claims directly issued by corporations, asset transformation o FIs purchase primary securities issued by finance corporations, they finance these purchases by selling secondary securities to household investors and other sectors in the form of deposits and insurance • FIs monitor the corporations keeping agency costs to a minimum • Liquidity risk: FI securities have better liquidity than corporate securities Functions of FIs • Provide a brokerage function along with asset transformation function o Asset transformation: issuing deposits to buy primary securities • Provide transaction services and information specialists • Enact monetary policy Primary Vs secondary securities • Primary o Financial claims...
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...the styles for this template are available on the Home tab of the ribbon, in the Styles gallery.] Keywords: [Click here to add keywords.] Comparing IFRS to GAAP In the financial industry there is a well-known difference between how the United States operates, and how the rest of the world conducts accounting practices. Generally Accepted Accounting Principles (GAAP) is the accounting standard practiced in the US. International Financial Reporting Standards (IFRS) is the accounting standard used around the world. GAAP is known to have more rules, while IFRS is based more on principle and general acceptance. In this paper GAAP and IFRS will be compared and contrasted in a brief overview. IFRS 2-1 The main difference between the formatting of IFRS and GAAP statement of financial of position and a GAAP balance sheet is the ordering of liquidity. IFRS does not require a particular order or any classification of accounts. It is common for companies to report assets in reverse liquidity under IFRS. An example of the order would be as follows: long term assets, current assets, shareholder equity, long term liabilities, and current liabilities. GAAP specifies and requires all a company’s account be classified and ordered based on liquidity. An example of the order would be as follows: current assets, long term assets, current...
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... Table of Contents EXECUTIVE SUMMARY 3 BACKGROUND: 3 INVESTMENT STRATEGY: 3 REAL ESTATE PORTFOLIO & TENANT DIVERSIFICATION: 4 DIVIDEND GROWTH: 5 REVENUE GROWTH: 7 RISKS/MITIGANTS: 8 RISK: MARKET RISKS 8 MITIGANTS: 8 RISKS/MITIGANTS: 10 RISK: INTEREST RISK 10 MITIGANTS: 10 MITIGANTS: 11 ANALYSIS: 13 MARKET PREVIEW & HOW THE FIRM FITS IN: 13 GROWING CONSUMER CONFIDENCE: 15 SHAREHOLDER DIVIDENDS INVESTMENT VEHICLE: 16 ACCESS TO CAPITAL: 17 INDUSTRY RANK: 17 EARNINGS TRENDS: 17 COMPETITORS: 18 FINANCIAL STATUS: 19 BALANCE SHEET: 21 INCOME STATEMENT: 22 CASH FLOW: 23 ANALYSIS WITH ASSUMPTIONS & SUPPORT 25 TABLES: 25 EXHIBITS FROM SPREADSHEETS 30 SUMMARY & CONCLUSION 33 REAFFIRMED HIGHLIGHTS: 34 STRENGTH, LIQUIDITY AND PERFORMANCE: 34 OUTLOOK: 35 EXECUTIVE SUMMARY Background: Realty Income Corporation (“Realty Income” or “RIC” or “REIT”) is an equity real estate investment trust (REIT). Realty Income is a publicly traded (NYSE: Ticker symbol “O”) and is also known as “the monthly dividend company” which parallels its dividend payout structure. The Company is engaged in acquiring and owning freestanding retail and other properties that generate rental revenue under long-term lease agreements (primarily 10 to 20 years). In January 2013, it acquired American Realty Capital Trust. The Company has an in-house acquisition, leasing, legal, credit research, real estate research, portfolio management and capital markets. As of December 31, 2013...
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...Partners Healthcare Case Aanlysis by az2311 | studymode.com Statement of Problem Partners Healthcare had established several financial resources pools, such as the short-term pool (STP) and the LTP, so that they can satisfy different needs of the several hospitals in the network. In more detail, the STP was invested with very high-quality, short-term fixed-income financial instruments. The average maturity of these instruments is about one to two years. STP is always treated as the risk-free part of the hospitals’ holdings. On the other hand, the LTP is thought as the risky part of holdings. It consists of different forms of equity and a smaller fixed-income part. In order to diversify the risks of the LTP, the Partners Investment Committee introduced a new type of assets, real assets, into the original LTP during the past years. Both of the assets’ performance turned to be excellent during 2004. As a result, the Investment Committee was considering expanding the real-asset segment of the LTP. Michael Manning, the deputy treasurer of Partners Healthcare System, was asked to recommend the size and the composition for the real-asset portfolio contributed to the $2.4 billion long-term pool (LTP) in the Partners. Facts and Analysis Due to the fact that different Partners Healthcare hospitals might have different acceptable risk levels for their investment portfolio then the most reasonable solution would be to invest both in risk-free STP and risky LTP. By choosing different...
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...------------------------------------------------- Top of Form Grading Summary | These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. | Date Taken: | 1/29/2012 | Time Spent: | 2 h , 45 min , 16 secs | Points Received: | 129 / 150 (86%) | | Question Type: | # Of Questions: | # Correct: | Essay | 7 | N/A | | | Grade Details | 1. | Question : | (TCO D) A classmate is considering dropping his accounting class because he cannot understand the rules of debits and credits. Explain the rules of debits and credits in a way that will help him understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders' equity) and the income statement (revenues and expenses). | | | Student Answer: | | Debits and Credits are pretty simple. Everyone knows the famous saying " what goes up most come down." It's the same theory in that if you have a debit or credit, you will have the a debit or credit on the other end. Think as debit as when you use your debit card, you have money withdrawing from your personal checking; therefore you have money leaving the account. Credit is basically how the lenders give you money to use; therefore you have money coming in to your account. | | Instructor Explanation: | Accounting is based on the double-entry system. This system records the dual effect of each transaction in the...
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...Accounting Recognition and Measurement Agenda for Seminar 1 A. Course introduction 1. Contents overview Seminars 1 to 3 Conceptual Issues Underlying Accounting Recognition and Measurement presented by 2. Assessment components & expectations 3. Administrative matters B. Conceptual overview 1. Purpose of accounting & its role in contracting 2. Concepts of recognition, measurement & disclosure in accounting Low Kin Yew Associate Professor Nanyang Business School Semester 1 2012-13 2 Course Contents Overview Contents 1 Fundamental concepts & issues in accounting Assets: a. Leases b.Investment property c. Financial assets Liabilities: a. Financial liabilities b. Deferred tax liabilities Seminar # 1, 2 & 3 3, 4 & 5 7 8, 9 & 10 Course Contents Overview Contents 4 Equity Revenue a. Revenue recognition principles & criteria b. Customer loyalty programs c. Construction vs. real estate development Expenses a. Expense recognition principles b. Share-based payments transactions & employee stock options c. Employee benefits Seminar # 16 2 5 17 18 19 & 20 3 11 & 12 13, 14 & 15 6 21 21, 22 & 23 23 3 4 Assessment Components Components 1 2 3 4 Seminar participation Group project presentation Term quiz Final exam Total Weighs 15 15 20 50 100 Individual Group (contents: 50%) & individual (presentation 50%) Individual Individual Basis Seminar Participation: Expectations (Project Discovery) Pedagogy • Students take active responsibility...
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