TIPED Accounting and Finance Introduction to Financial Statements - PowerPoint PPT Presentation

TIPED Accounting and Finance

Introduction to Financial Statements

Financial Statements • The Financial Statements – The Importance of Cash Flow • Some Accounting Concepts – Matching / Accruals – Prudence – Consistency

The Income Statement • Covering a period of time • Accruals • Different Layouts • The Various Sub-Totals • Judgement Aspects

The Balance Sheet • Where the funding has come from and where is it being put to use • As at … • Accounts never close • Assets and Liabilities • Layout Options

The IS and BS Connection … • How are the two linked • Examples – Provisions – Fixed Assets and Depreciation • A closer look at equity – Profit and Retained Earnings

TIPED Accounting and Fina nce The Financial Planning Process

The Financial Planning Process • What is a Budget? – Projected or pro-forma set of financial statements • Strategy, Planning & Budgeting

The Budgeting Process • When is the Budget Prepared? • How is it Prepared? • Who Prepares it?

Budget Preparation • Last year ++ • Actual Contracts and Commitments • Balance Sheet Budgeting • Zero Based Budgeting

Why Budget? • Predict External Funding Needs • Allocation of Scarce Resources • Control – Focus Attention (variance analysis) – Performance Benchmarking • Look ahead and plan for the Future

TIPED Accounting and Finance Introduction to Corporate Finance

Time Value of Money • Present and Future Value • Graphical Representation • The Calculations – Calculator – Discount Tables – Examples

Valuing Debt • Bonds • Coupon Rates • Valuing a Bond • Changes in Interest Rates

Capital Investment Appraisal • Mapping the cash flows • The Discount Factor • Present Value vs NPV • Positive or Negative

Capital Investment Appraisal Cont … • Payback • Discounted Payback • IRR • PI

Share Issues • IPO (JSE Regulations) • Pricing the IPO • Over/Under Subscription • Underwriting • Dilution

Rights Issue • Proportional Offer to Existing Shareholders • Nil Paid Letter • Value of a Right • Examples

Debt Financing • Issuing Debt • Types of Debt – Term Loans – Bonds – Debentures – Commercial Paper

Cost of Capital • WACC • Cost of Debt • Cost of Equity • Differing Expectations • The effect of tax • Gearing and WACC

Investor Ratios and Metrics • EPS • P : E • Earning Yield • Dividend Yield • Market-to-book

Some Market Issues • What drives a share price? • The role of analysts – Small Cap • STRATE on the JSE • Insider Trading