strategy 2 and amazon case analysis

What is accounting?

The process of measuring interpreting and communicating financial information to support decision-making

Who uses accounting information?

Managers investors creditors government agencies and not-for-profit organizations

What are the three main business activities?

Financing investing and operating activities

What is financing activity?

Raising money for the business (e.g. loans issuing shares)

What is investing activity?

Buying assets like equipment buildings or technology

What is operating activity?

Day-to-day business operations generating revenue and expenses

What do public accountants do?

Provide auditing tax and consulting services to external clients

What do management accountants do?

Provide financial information for internal decision-making

What do government accountants do?

Ensure efficiency and accountability in public sector finances

What do not-for-profit accountants focus on?

Ensuring funds are used properly and accountability to donors

What is GAAP?

Generally Accepted Accounting Principles used to ensure consistency and reliability

What are the two main accounting standards?

IFRS and ASPE

What is IFRS?

International Financial Reporting Standards used globally

What is ASPE?

Accounting Standards for Private Enterprises used in Canada

What is consistency in accounting?

Using the same methods over time for comparability

What is relevance in accounting?

Information useful for decision-making

What is reliability in accounting?

Information that is accurate and trustworthy

What is comparability in accounting?

Ability to compare financial statements across firms

What is timeliness in accounting?

Providing information quickly for decision-making

What is verifiability?

Ability to confirm accuracy of financial data

What is the role of the Canada Revenue Agency (CRA)?

Collect taxes and enforce tax laws in Canada

What is the Sarbanes-Oxley Act (SOX)?

US law to improve financial reporting and prevent fraud

What is Bill 198?

Canadian regulation similar to SOX for financial transparency

What is the CFPO Act?

Law preventing bribery of foreign officials

What are the steps in the accounting cycle?

Record classify summarize financial data

What is a journal?

A record of transactions in chronological order

What is a ledger?

A record grouping transactions by account

What is the accounting equation?

Assets = Liabilities + Owners’ Equity

What are assets?

Resources owned by a business

What are liabilities?

Debts owed by a business

What is owners’ equity?

Owner’s investment in the business

What is double-entry bookkeeping?

Each transaction affects at least two accounts

What is a balance sheet?

A snapshot of assets liabilities and equity at a point in time

What is an income statement?

Shows revenues expenses and profit over a period

What is a statement of changes in equity?

Shows changes in owners’ equity over time

What is a statement of cash flows?

Tracks cash inflows and outflows

What is liquidity?

Ability to pay short-term obligations

What is the current ratio?

Current assets divided by current liabilities

What is the quick ratio?

Liquid assets divided by current liabilities

What is activity ratio?

Measures efficiency in using assets

What is inventory turnover?

How quickly inventory is sold

What is receivables turnover?

How quickly customers pay debts

What is asset turnover?

How efficiently assets generate revenue

What is profitability ratio?

Measures ability to generate profit

What is gross profit margin?

(Revenue - Cost of goods sold) divided by revenue

What is net profit margin?

Net income divided by revenue

What is return on equity?

Net income divided by owners’ equity

What is leverage ratio?

Measures use of debt financing

What is debt ratio?

Total liabilities divided by total assets

What is debt-to-equity ratio?

Total liabilities divided by equity

What is a budget?

A financial plan outlining expected revenues and expenses

What is a sales budget?

Forecast of future sales

What is a cash budget?

Forecast of cash inflows and outflows

Why is the cash budget important?

Prevents running out of cash and bankruptcy

What is a production budget?

Plan for production levels based on sales forecasts

How is technology changing accounting?

AI automation cloud systems and real-time data

What is cloud accounting?

Online accounting systems accessible anywhere

What is big data in accounting?

Large datasets used for better decision-making

What is the role of AI in accounting?

Improves forecasting fraud detection and efficiency

Why are exchange rates important?

Affect international financial reporting and profits

What challenge do multinational companies face?

Currency conversion and fluctuations

What is financial management?

Planning obtaining and managing funds effectively

What is the goal of financial management?

Maximize shareholder wealth

What is a CFO?

Chief Financial Officer responsible for financial planning

What is risk in finance?

Uncertainty of gain or loss

What is return?

Gain or loss from an investment

What is the risk-return tradeoff?

Higher returns usually involve higher risk

Why is accounting important?

It supports decision-making planning and control

What is financial management?

Planning obtaining and managing a company’s funds to achieve its objectives efficiently

What is the main goal of financial management?

Maximize shareholder wealth

Who is the CFO?

Chief Financial Officer responsible for financial planning and decisions

Who reports to the CFO?

Treasurer controller and VP of financial planning

What does the treasurer do?

Manages cash financing tax and investor relations

What does the controller do?

Handles accounting financial statements and audits

What does the VP of financial planning do?

Prepares forecasts and analyzes investments

What is risk?

Uncertainty of gain or loss

What is return?

Gain or loss from an investment over time

What is the risk-return trade-off?

Balancing higher returns with higher risk

Why is leverage important?

It increases potential returns but also increases risk

What is a financial plan?

A document outlining funding needs timing and sources of funds

What are the 3 key financial planning questions?

How much money is needed when it is needed and where it will come from

What is the first step in financial planning?

Forecast sales

What is the second step in financial planning?

Estimate profits and expenses

What is the third step in financial planning?

Determine asset needs and financing

What is financial control?

Comparing actual results to forecasts and correcting differences

What are current assets?

Assets expected to be converted to cash within one year

What are examples of current assets?

Cash accounts receivable inventory marketable securities

What are marketable securities?

Low-risk short-term investments easily converted to cash

What are accounts receivable?

Money owed by customers from credit sales

What is inventory?

Goods held for sale

What is working capital?

Current assets minus current liabilities

What is inventory management?

Controlling inventory levels to minimize costs and avoid shortages

What is capital investment analysis?

Evaluating long-term investments in assets

What are expansion decisions?

Investments to grow the business

What are replacement decisions?

Replacing old assets with new ones

What is asset intensity?

Amount of assets needed to generate sales

What challenge do global firms face?

Exchange rate fluctuations

What is an exchange rate?

Value of one currency relative to another

What is capital structure?

Mix of debt and equity financing

What is debt financing?

Borrowing money that must be repaid with interest