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Flashcards in Week 1 - Accounting as a information system Deck (9)
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What do the annual report to shareholders contain? (/financial accounting)


• the Statement of Comprehensive Income (or Income Statement);
• the Statement of Financial Position (or Balance Sheet);
• the Statement of Changes in Equity; and
• the Statement of Cash Flows 


Why is the annual report of limited usefullness to managers? (/financial accounting)

- produced only once per year;
- highly aggregated; and
- provides no comparison to target 


What is the purpose of management accounting?

Provides financial and non-financial information to:

- develop and implement strategy by planning for the future (budgeting);

- make decisions about products, services, prices and what costs to incur (decision-making);

- ensure that plans are put into action and are achieved (control). 


Explain some differences between accounting management and financial statements(/acconting).


Mention the 5 types of Accounts

  • Assets (owns): 
    • Fixed (property, plant, and equipment - things that cannot easily be converted into cash)
    • Current (inventory/stock)
  • Liabilities (ows): 
    • Long term (are liabilities with a future benefit over one year)
    • Current
  • Equity
  • Revenue
  • Expense 


Allocate these to 1 of the 5 types of accounts

3 fixed
4 current
5 current
6 long term liability
7 current liability
8 equty
9 current assets
10 nothing (become an expense)
11 equity
12 fixed assets


What are the objectives of the firm, and what might be considered the most important one today?


How do you measure it?


And how do they do well?

1) Objectives of the firm:
• Maximise profits?
• Maximise sales?
• Corporate citizenship?
• Look after employees?
• Maximise shareholder value/wealth? (this is probably the most important)

2) shareprice and dividends

3) for increase: perform well (by good products, liking by costumer, technology, strategy, good management, happy employees, good relationsship with banks+suppliers). 
So shareholder value will only increase if all of above is good, therefore is that the best objective. 



What are the types of "cost of capital"?


Which is most risky and expensive?


• Debt: interest rate
• Equity: dividend & capital growth


Equity is more expensive for companies (more risk for investors—> want more money)


What is WACC?

 Weighted average cost of capital (WACC) 


It is constituted by equity (shares) and borrowings (debt).