business
Part
2
Financial Tools
Chapters in This Part
3
4
5
Financial Statements and Ratio Analysis
Cash Flow and Financial Planning
Time Value of Money
INTEGRATIVE CASE 2 Track Software, Inc.
n Part 2 you will learn about some of the basic analytical tools that financial managers use almost every day. Chapter 3 reviews the main financial statements that are the primary means by which firms communicate with investors, analysts, and the rest of the business community. Chapter 3 also illustrates some simple tools that managers use to analyze the information contained in financial statements to identify and diagnose financial problems.
I
Firms create financial statements using the accrual principles of accounting, but in finance it is cash flow that really matters. Chapter 4 shows how to use financial statements to determine how much cash flow a firm is generating and how it is spending that cash flow. Chapter 4 also explains how firms develop short-term and long-term financial plans.
Managers have to decide whether the up-front costs of investments are justified by the subsequent cash that those investments are likely to produce. Chapter 5 illustrates techniques that firms use to evaluate these sorts of trade-offs.
55
3
Financial Statements and Ratio Analysis
Learning Goals
Why This Chapter Matters to You
LG 1 Review the contents of the
In your professional life
LG 2 Understand who uses financial
ACCOUNTING You need to understand the stockholders’ report and preparation of the four key financial statements; how firms consolidate international financial statements; and how to calculate and interpret financial ratios for decision making.
stockholders’ report and the procedures for consolidating international financial statements. ratios and how.
LG 3 Use ratios to analyze a firm’s
liquidity and activity.
LG 4 Discuss the relationship between
debt and financial leverage and the ratios
2
Financial Tools
Chapters in This Part
3
4
5
Financial Statements and Ratio Analysis
Cash Flow and Financial Planning
Time Value of Money
INTEGRATIVE CASE 2 Track Software, Inc.
n Part 2 you will learn about some of the basic analytical tools that financial managers use almost every day. Chapter 3 reviews the main financial statements that are the primary means by which firms communicate with investors, analysts, and the rest of the business community. Chapter 3 also illustrates some simple tools that managers use to analyze the information contained in financial statements to identify and diagnose financial problems.
I
Firms create financial statements using the accrual principles of accounting, but in finance it is cash flow that really matters. Chapter 4 shows how to use financial statements to determine how much cash flow a firm is generating and how it is spending that cash flow. Chapter 4 also explains how firms develop short-term and long-term financial plans.
Managers have to decide whether the up-front costs of investments are justified by the subsequent cash that those investments are likely to produce. Chapter 5 illustrates techniques that firms use to evaluate these sorts of trade-offs.
55
3
Financial Statements and Ratio Analysis
Learning Goals
Why This Chapter Matters to You
LG 1 Review the contents of the
In your professional life
LG 2 Understand who uses financial
ACCOUNTING You need to understand the stockholders’ report and preparation of the four key financial statements; how firms consolidate international financial statements; and how to calculate and interpret financial ratios for decision making.
stockholders’ report and the procedures for consolidating international financial statements. ratios and how.
LG 3 Use ratios to analyze a firm’s
liquidity and activity.
LG 4 Discuss the relationship between
debt and financial leverage and the ratios