BUAD 101- Exam 3 (Information Systems, Accounting, and Finance)

Steps to Decision Making

1. know decision needs to be made
2. generate alternates
3. analyze alternates
4. select best option
5. implement alternate
6. evaluate effectiveness

Accounting

the process of collecting, recording, classifying, summarizing, reporting, and analyzing financial activities

Accounting is important because...

it is the part of the language of business and you need to know how to use it

Big Theme

all business functions require accounting knowledge

Provides framework for looking at...

past performance, current financial health, and possible future performance

Earliest form of writting

used for accounting in Neolithic Mesopotamia
- cuneiform table (Ashmolean Museum)

Accounting System

classify, summarize, and analyze data -> prepare financial reports -> use financial reports to evaluate the firm and make decisions

Internal Reporting (Managerial Accounting)

financial reports for internal use by company management
- sales reports
- production cost reports
- other detailed financial reports

External Reporting (Financial Accounting)

financial statements for use by investors, lenders, and others outside the organization
- balance sheets
- income statements
- statement of cash flow

Public Filings

contains loads of financial information that can be used for valuation and evaluation

Valuation

- whats the value of the company?
- what it worth?
- is the stock priced accordingly?

Evaluation

- what can we learn from this financial information to identify issues facing the organization that must be managed/overcome to better compete?

Financial Statements

income statement, balance sheet, cash flow statement

Horizontal Analysis

lines over time

Vertical Analysis

everything as % of net sale/revenue (or total assets on balance sheet)

Ratio Analysis

use what is most relevant

Profitability Ratios

gross profit margins, operating profit margins, net profit margins, return to total assets, return to equity, earnings per share

Liquidity Ratios

current ratio, quick ratio, cash ratio, working capital

Leverage/ Solvency/ Debt Ratios

debt-to-asets ratio, debt-to-equity ratio, times intrest earned ratio

Activity/ Operating Efficiency Ratio

accounts receivable turnover, total assets turn over, inventory turnover, days sales in inventory

Other Ratio Analysis

price/earning ratio, dividend yield, free cash flow

Balanced Scorecard

financial, customer, internal business process, learning and growing

Triple Bottom Line

people, planet, and profit

ESG

environment, social, and government

Federal Reserve

financial institution

Dual Mandate

stable prices and promote full employment

LIBOR

central bank of England

Intermediary Banks

deposit funds then give out to who needs it

Commercial Banks

old national bank, wells fargo

Credit Unions

member owned, don't pay taxes
- Liberty Federal Credit Union