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

The Financial Planning Process TIPED Accounting and Finance

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

Introduction to Corporate Finance TIPED

Accounting and 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