Summary Financial Management 314 Notes

FINANCIAL MANAGEMENT 314 – FINANCIAL PLANNING & CONTROL



Component 1: Financial Statements



Component 2: Managerial Classification of Financial Statements



Component 3: Internal & Sustainable Growth Rates



Component 4: Financial Planning & Forecasting



Component 5: Estimating the Optimal Capital Structure



Component 6: Free Cash Flow Valuation




Contents per Component:

• Class Slides & Notes
• Class Problems
• Self-Study Problem
• Electronic Problem

, FIN MAN 314
CH 2 – FINANCIAL STATEMENTS
Financial statements need to be comparable
 Statements of companies may not be comparable as a result of different
accounting standards
 SA companies converted to IFRS after 2005; comparison to previous years where
other accounting standards were used may be problematic; IFRS only a guideline,
open for interpretation
 Multinational firms: US GAAP vs. IFRS


Solution ? Standardise published financial statements of
calc
Consistent
 Facilitates comparisons between companies
Ratios
and over time
 Simplifies the calculation of financial ratios


Reasons for standardisation




52 weeks

Comparability
-




is now difficult
& 53 Weeks




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be
should
the same
items

reponearement
- fin institution
nature iS
different

,1. STATEMENT OF PROFIT OR LOSS Income Statement




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&
Profitfor these
2. STATEMENT OF FINANCIAL POSITION (balance sheet)




sources e
of




items we baght
invested Capital
in to create
income




a
canb




3. STATEMENT OF CASH FLOW (cash flow statement)
Report the
on

movement of Cash
I during
the
yo



2

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.
3

, SCFISPL/ Sanc
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Formats of standardised financial statements:
 Examples of the three major financial statements are provided on SUNLearn
 Need to understand relationship between the ELEMENTS that form part of each
statement, and be able to identify all ITEMS included within these elements
 NB: Terminology used in the module
(see SUNLearn)