Bring a laptop running Excel, this is a hands-on course!

I. Accounting Fundamentals

The first section of the course presents the essential concepts and terminology of the accounting profession. The accounting equation is introduced as the foundation for both the analysis of financial transactions and for the General Journal and General Ledger as the means of recording those transactions.

  A. The Role of Accounting

  B. Types of Accounting

  C. Management Accounting

  D. Financial Accounting

  E. The Accounting Equation

  F. Accounts

  G. Self-Checking Property

  H. Debits and Credits

  I. Accounting Books

  J. The General Journal

  K. General Journal Rules

 L. Accounts

II. The Accounting Cycle

Once the financial transactions have been analyzed and recorded, the accounting cycle is not complete until those transactions have been summarized and reduced to forms that can be read and interpreted by financial analysts and the firms management.

 A. The Accounting Cycle

 B. The Three Financial Statements

     1. Income Statement

     2. Statement of Shareholder Equity

  3. Balance Sheet

  C. Retail Firms

  D. Gross Margin

  E. Income Statement

  F. Manufacturing Firm

  G. Three Types of Inventory

     1. Materials

     2. Work-in-Process

     3. Finished Goods

  H. Cost Flows for a Manufacturing Company

  I. Corporate Financial Statements  Contributed Capital

  J. The Corporate Balance Sheet

III. Analyzing Financial Statements

Once the accountants have produced the financial statements, analysts utilize financial ratio analysis as a first step in analyzing these statements. In preparation for this analysis, a fourth financial statement, the statement of cash flows, is introduced.

  A. Purposes and Methods of Financial Statement Analysis

  B. The Statement of Cash Flows

  C. Liquidity Ratios

     1. Current Ratio

     2. Quick Ratio

     3. Cash Ratio

  D. Solvency Ratios

     1. Total Debt Ratio

     2. Times Interest Earned

  E. Asset-Utilization Ratios

     1. Inventory Turnover

     2. Days Sales in Inventory

     3. Receivables Turnover

     4. Days Sales in Receivables

  F. Profitability Ratios

     1. Profit Margin

     2. Return on Assets

     3. Return on Equity

  G. Du Pont Chart

  H. Annual Reports

  I. Governmental Requirements

  J. Auditors Opinion

  K. Footnotes

IV. Return on Invested Capital

Return on Invested Capital (ROIC) is a means often used by both managers and investors of visualizing the quality of the firms earnings. Specifically it calculates the efficiency of the firm in allocating its capital to profitable investments. It is a useful tool for assessing the overall performance of the firm and is a useful addition to financial ratio analysis.

  A. Purpose of ROIC

  B. Relation to Du Pont Analysis

  C. ROIC versus ROE

  D. ROIC Calculations

  E. ROIC Formula

V. Financial Forecasting

A firms financial statements provide the preliminary information necessary to help determine the financial needs for the coming fiscal year. The pro forma income and balance sheets are introduced as tools used to forecast the increase in assets required to meet various levels of financial growth.

  A. Pro Forma Balance Sheet and Income Statement

  B. External Financing Requirements

  C. Internal Growth Rate

  D. External Growth Rate

  E. The Financial Forecasting Model

  F. Percentage of Sales Approach: The Pro Forma Income Statement

  G. Dividend Policy

  H. Retained Earnings

  I. Percentage of Sales Approach  The Pro Forma Balance Sheet

   J. External Financing Requirements  Formula Approach

  K. Sustainable Growth Rate

VI. Time Value of Money

The Time Value of Money model recognizes that, because of the opportunity costs involved, a dollar in the future is not worth as much as a dollar in the present. Present value concepts are developed from the familiar compound interest formula, and the use of net present value as a means of comparing cash flows is illustrated.

  A. Time Value of Money

  B. Compound Interest Formula

  C. Future Value

  D. Future Value - Rule of 72

  E. Present Value

  F. Net Present Value

  G. Annuities

  H. Present Value of an Annuity

  I. Internal Rate of Return (IRR)

  J. Analyzing Project Investments

VII. Project Analysis and Selection

Net present values and internal rate of return methodologies can be used to evaluate the economic viability of a project and to select between alternative projects. This section of the course applies these methods to the various cash flows that are important in analyzing potential projects (changes in depreciation methodologies, increases/decreases and returns of working capital, salvage value, etc.)

  A. Project Cash Flows

  B. Incremental Cash Flows

  C. Evaluating Net Present Value Estimates

VIII. Risk and Return

The financial decisions of the firm are made against a backdrop of uncertainty, thus it is necessary that risk be factored into financial analysis. The risk analysis model is based upon a differentiation between business and market risks that relates only appropriate risk to the return on an investment.

  A. Risk versus Return

  B. Risk versus Return Using T-Bills

  C. Security Market Line

  D. Required Rate of Return Formula

IX. Cost of Capital

Raising money for the operation and growth of the firm has a cost. Decisions about what projects to fund, how fast the firm should grow, and where capital should be raised all depend upon the cost of that capital. The sources of capital are discussed along with the characteristics, advantages, and disadvantages of each.

  A. External Financing Sources

  B. Types of Bonds

     1. Mortgage Bonds

     2. Debentures

  C. Bond Terminology

  D. Characteristics of Preferred Stock

  E. Characteristics of Common Stock

  F. Target Capital Structure

  G. The Weighted Average Cost of Capital (WACC)

  H. Determining the Capital Budget

  I. The Security Market Line and the WACC

  J. Raising Capital

  K. Financial Leverage

  L. Leverage and the Capital Structure

  M. Corporate Taxes and Capital Structure

X. Introduction to Management Accounting

Financial information can be used for managerial decision making as well as for financial analysis. Management accounting begins with the development of the relationship between cost, volume, and profit. The cost-volume-profit formula can be utilized as the basis for profit planning and breakeven analysis.

  A. Cost Behavior

  B. CVP Equation

  C. Profit Planning

  D. Breakeven Analysis

XI. Introduction to Budgeting

The budgeting process is built around the master budget. The master budget integrates the many subsidiary budgets to produce not only budgetary figures but also a set of pro forma financial statements. These forms can be analyzed to determine the value of the financial decisions and assumptions underlying the budget.

  A. Purposes/Benefits of Budgeting

  B. Master Budget

  C. Subsidiary Budgets

     1. Sales Budget

     2. Selling Budget

     3. Production Budget

     4. General and Administrative Budget

     5. Capital Budget

     6. Cash Budget

  D. Pro Forma Statements

  E. Pro Forma Income Statement

  F. Balance Sheet (Beginning)

  G. Pro Forma Balance Sheet

XII: Variance Accounting

In comparing actual versus budgeted numbers, total figures can be misleading if the components of those totals are not considered separately. Variance accounting was developed to allow managers to analyze budget performance in just such a manner. Using variance accounting to evaluate project performance (schedule and cost) presents a special set of issues that must be considered.

  A. Responsibility Accounting

  B. Variance Accounting

  C. Flexible Budget

  D. Flexible Budget in Graphical Form

  E. Earned Value Analysis

     1. Planned Value (PV)

     2. Actual Cost (AC)

     3. Earned Value (EV)

  F. Variances

     1. Schedule Variance

     2. Cost Variance

  G. Performance Indexes

     1. Cost Performance Index

     2. Schedule Performance Index

  H. Estimate at Completion

XIII. Class Wrap Up and Discussion