Ch01 5th Ed Narayanaswamy Financial ing 4o4c6w

Financial ing: A Managerial Perspective Fifth Edition Prepared by R. Narayanaswamy Indian Institute of Management Bangalore

1 April 2014

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Chapter 1 ing, Markets, and Governance

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Understanding Business Organizations

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Merchandising organizations Manufacturing organizations Service organizations Business organizations as cash generating-cum-dispensing machines

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Business Organizations

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What is ing





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ing is the language of business Who should know ing? Why ing in MBA? The MBA Oath and financial reporting ing information and economic decisions © PHI Learning Private Limited New Delhi

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The ing Information System

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s of ing Information 1 April 2014

Investors Lenders Analysts and advisers Managers Employees and trade unions Suppliers and trade financiers Customers Government and regulatory authorities The public © PHI Learning Private Limited New Delhi

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Financial ing and Management ing

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Financial ing Management ing How do they differ?

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ing Measurement Assumptions

Reporting entity Going concern



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Historical cost

Periodicity Money measurement

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Generally Accepted ing Principles and the ing Environment

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Generally Accepted ing Principles and the ing Environment

ing standards and policies



Converging IGAAP with IFRS



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ing standards ing standard-setting arrangements ing policies IGAAP IFRS Ind AS

Principles or rules? © PHI Learning Private Limited New Delhi

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Forms of Business Organization

Sole proprietorship Partnership Limited company



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Listed Public Private

Limited liability partnership Legal formalities for a limited company © PHI Learning Private Limited New Delhi

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The Corporate Organization

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ing, Capital Market and Corporate Governance



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The lemons principle and the problem of adverse selection Signalling quality Moral hazard and corporate governance

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The ing Equation

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Economic resources = Claims Assets = Liabilities + Equity Assets: “own” Liabilities: “owe” Equity: “residual interest” Analyzing the effect of transactions

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Financial Statements



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Statement of profit and loss Statement of retained earnings Balance sheet Cash flow statement Statement of retained earnings How are the financial statements interrelated? Preview of financial statement analysis © PHI Learning Private Limited New Delhi

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What do ants Do?

Public ing



Private ing

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Auditing Forensic ing and risk management Tax services Advisory services Bankruptcy Small business services Management ing Internal auditing Information systems

Government ing Not-for-profit ing © PHI Learning Private Limited New Delhi

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ing as an Academic Discipline

Illustrative research areas

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ing and stock prices Benefits of disclosure Usefulness of accrual and cash Reporting losses faster than gains Selection of ing methods and disclosure levels Predicting future profits from past profits Disclosure and managerial behaviour Executive pay and financial performance © PHI Learning Private Limited New Delhi

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Fraud and Ethical Issues in ing



What leads to fraud and unethical ing? Fraud-hit companies: e.g.

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Satyam Enron WorldCom

The Satyam case Resolving ethical dilemmas Whistle-blowing © PHI Learning Private Limited New Delhi

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End of Chapter 1 ing, Markets, and Governance

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