Module 1 Accounting Notes
4 Financial Statements:
• Balance sheet
• Income statement
• Statement of stockholders’ equity
• Statement of cash flows
3 Main User Groups of Financial Statements:
• Investors and equity analysts - use statements to judge the company’s profitability and financial strength to
make estimates of the value of the company’s equity securities
• Lenders and credit analysts - use statements to assess the company’s ability to repay debts and manage credit
risk associated with the company
• Company managers - use statements to inform decisions such as where to invest scare resources, how to
finance investments, maximize profitability, and how much cash to maintain
3 Types of Business Activities:
• Operating activities - hiring & training; manufacturing, marketing, selling, and delivering; customer support
• Investing activities - acquire land, buildings and equipment; expand into new markets, new products/services
• Financing activities - raise funds for operating and investing - selling stock, borrowing from banks
Business Forces:
• factors that shape a unique business environment
◦ Ex: market conditions, competitive pressures, regulations, etc.
• impacts the way a company conducts business, its goals and objects, and strategic planning process
◦ strategic plan - how a company plans to achieve its goals and objective & depends on an effective
analysis of market demand and supply
‣ the plan must also include competitive analyses, opportunity assessments, and business threats
operating
investing financing
spategic
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4 Financial Statements:
• Balance sheet
• Income statement
• Statement of stockholders’ equity
• Statement of cash flows
3 Main User Groups of Financial Statements:
• Investors and equity analysts - use statements to judge the company’s profitability and financial strength to
make estimates of the value of the company’s equity securities
• Lenders and credit analysts - use statements to assess the company’s ability to repay debts and manage credit
risk associated with the company
• Company managers - use statements to inform decisions such as where to invest scare resources, how to
finance investments, maximize profitability, and how much cash to maintain
3 Types of Business Activities:
• Operating activities - hiring & training; manufacturing, marketing, selling, and delivering; customer support
• Investing activities - acquire land, buildings and equipment; expand into new markets, new products/services
• Financing activities - raise funds for operating and investing - selling stock, borrowing from banks
Business Forces:
• factors that shape a unique business environment
◦ Ex: market conditions, competitive pressures, regulations, etc.
• impacts the way a company conducts business, its goals and objects, and strategic planning process
◦ strategic plan - how a company plans to achieve its goals and objective & depends on an effective
analysis of market demand and supply
‣ the plan must also include competitive analyses, opportunity assessments, and business threats
operating
investing financing
spategic
iqiiiisiiuriti.es
repaydebts
scarce
I
EE o
I
I p
O
