Download - RECAP LECTURE 7. CAPITAL STRUCTURE RECAP LECTURE 7 SHARE FEATURES THAT AFFECT CAPITAL STRUCTURE WHAT ARE THEY?

RECAP LECTURE 7

RECAP LECTURE 7

• CAPITAL STRUCTURE

RECAP LECTURE 7

SHARE FEATURES THAT AFFECT CAPITAL STRUCTURE

• WHAT ARE THEY?

RECAP LECTURE 7

1. OWNERSHIP RIGHTS2. REPAYMENT REQUIREMENTS3. CLAIM ON ASSETS4. CLAIM ON PROFITS

RECAP LECTURE 7

• WHAT ARE THE INTERNAL FACTORS THAT AFFECT CAPITAL STRUCTURE?

• WHAT ARE THE EXTERNAL FACTORS THAT AFFECT CAPITAL STRUCTURE?

A REVIEW OF FINANCIAL ACCOUNTING

• ACCOUNTING IS OFTEN SAID TO BE THE LANGUAGE OF BUSINESS.

• IT IS USED IN BUSINESS WORLD TO DESCRIBE THE TRANSACTIONS ENTERED INTO BY ALL KINDS OF ORGANIZATIONS.

• ACCOUNTING TERMS AND IDEAS ARE THEREFORE USED BY PEOPLE ASSOCIATED WITH BUSINESS, WHETHER THEY ARE MANAGERS, OWNERS, INVESTORS, BANKERS, LAWYERS OR ACCOUNTANTS


• FINANCIAL ACCOUNTING IS A SYSTEM OF KEEPING BUSINESS RECORDS SO AS TO EXPLAIN WHAT IS HAPPENING IN THE BUSINESS

• IN THIS LECTURE WE WILL REVIEW THE BASIC PRINCIPLES AND STRUCTURE OF FINANVIAL ACCOUNTING


• THE FIELD OF ACCOUNTING CAN BE DIVIDED INTO FOUR MAJOR AREAS:

1. FINANCIAL ACCOUNTING2. MANAGEMENT / MANAGERIAL ACCOUNTING3. COST ACCOUNTING4. AUDITING


FINANCIAL ACCOUNTING

• RECORDING TRANSACTIONS AND PREPARING REPORTS AND FINANCIAL STATEMENTS THAT CAN BE USED BY MANAGEMENT, OWNERS, CREDITORS, GOVERNMENT AGENCIES, AND OTHERS TO UNDERSTAND WHAT IS HAPPENING IN THE BUSINESS OR NON-PROFIT ORGANIZATION


MANAGEMENT/MANAGERIAL ACCOUNTING

• ALSO CALLED BUDGETING, THIS INVOLVES PLANNING FOR THE FUTURE. ACCOUNTING DATA ARE PREPARED ON AN EXPECTED OR PRO FORMA BASIS, THAT IS THE FIRM IS FORECASTING BUSINESS ACTIVITY


COST ACCOUNTING

• THIS AREA COVERS TECHNIQUES FOR DETERMINING THE COSTS OF A BUSINEE AND DEVELOPING METHODS FOR CONTROLLING THOSE COSTS.

• PARTICULAR ATTENTION IS GIVEN TO COMPUTING THE COST OF AN INDIVIDUAL PRODUCT OR SERVICE IN SITUATIONS WHERE THOUSANDS OF SUCH PRODUCTS OR SERVICES ARE SOLD


COST ACCOUNTING

• EXAMPLE: TOYOTA MOTOR COMPANY WANTS TO MANUFACTURE A NEW CAR, IT MUST INCUR LARGE CAPITAL COSTS IN ADVANCE, TRAIN THOUSANDS OF WORKERS ON A NEW ASSEMBLY LINE, STOCK MILLIONS OF COMPONENTS AND PARTS AND FINALLY BEGIN PRODUCTION.

• WHAT DOES IT COST TO PRODUCE THE FIRST CAR? • THESE QUESTIONS ARE ANSWERED IN THE AREA OF COST

ACCOUNTING


AUDITING

• AN AUDIT MAY BE DEFINED AS AN EXAMINATION OF ACCOUNTING OR FINANCIAL RECORDS TO DETERMINE WHETHER A COMPANY, BANK OR OTHER ORGANIZATION IS MEETING CERTAIN RULES OR STANDARDS.

• AUDITING IS THE FIELD THAT DEVELOPS STANDARDS FOR

AUDITS AND PROVIDES THE PEOPLE TO CONDUCT AUDITS.


AUDITING

1. INERNAL AUDITOR

2. EXTERNAL AUDITOR


INTERNAL AUDITOR

• AN AUDITOR MAY WORK FOR A COMPANY AND CONDUCT AN INTERNAL AUDIT, ENSURING THAT ESTABLISHED ACCOUNTING PROCEDURES AND MANAGEMENT INSTRUCTIONS ARE BEING FOLLOWED THROUGHT A COMPANY


EXTERNAL AUDITORS

• AN AUDITOR MAY WORK FOR AN OUTSIDE ACCOUNTING FIRM AND CONDUCT AN EXTERNAL AUDIT TO VERIFY ACCOUNTING AND FINANCIAL RECORDS TO CREDITORS, STOCKHOLDERS OR THE GOVERNMENT


GENERALLY ACCEPTED ACCOUNTING PRINCIPLES GAAP

• WHAT IS GAAP?


GAAP

• IS THE OVERALL BODY OF REGULATION ESTABLISHING HOW CAMPANY ACCOUNTS MUST BE PREPARED IN THE UK. THIS INCLUDES NOT ONLY ACCOUNTING STANDARDS BUT ALSO UK COMPANY LAW


GAAP

• A PRINCIPLE IS A FUNDAMENTAL LAW OR RULE UPON WHICH OTHER RULES AND PRACTICES ARE FORMED.

• OVER THE YEARS, THE PROFESSION OF ACCOUNTING HAS DEVELOPED A NUMBER OF GAAP THAT MUST BE FOLLOWED IN RECORDING,TRANSACTIONS AND PREPARING FINANCIAL STATEMENTS.


GAAP

• THESE PRINCIPLES HAVE BEEN ACCEPTED BY PROFESSIONAL GROUPS SUCH AS AMERCIAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA), ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS (ACCA)

• INSTITUTE OF CHARTERED ACCOUNTANTS ENGLAND & WALES (ICAEW), INSTITUTE OF CHARTERED ACCOUNTANTS PAKISTAN (ICAP)


• SOME OF THE MOST IMPORTANT OF THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOLLOW:

1. BUSINESS ENTITY2. GOING CONCERM3. CONSISTENCY4. MATERIALITY5. PRUDENCE