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Chapter 17

ADMS 3531 Chapter Notes - Chapter 17: Net Income, Shamrock, Standard Accounting Practice

4 pages41 viewsWinter 2014

Administrative Studies
Course Code
ADMS 3531
Dale Domian

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Chapter 17: Projected Cash Flow and Earnings
17.1 Sources of Financial Information
- in the daily stock price reports of the newspaper, you will see a shamrock symbol (clover) next to entries for many
individual stocks and it symbolizes that the company will send annual reports to readers who request them through The
Globe and Mail – requests can be made through telephone or fax
- online websites where companies whose stock trades on the exchange sometimes provide recent quarterly or annual
financial reports
- in addition to company reports, a wealth of primary financial information is available to investors through Ontario
Securities (OSC), it requires publicly traded companies to submit financial statements on a regular basis
- investors can get financial statements of Canadian companies from SEDAR files – SEDAR lists company reports,
announcements, and other info about public companies and mutual funds since 1997
- investors can use EDGAR files from Securities and Exchange Commission (SEC) website to find financial statements of
US stock exchange listed companies
- majority of big Canadian companies are listed on the US stock markets as well as on the Canadian exchanges
- Ontario Securities Exchange Commission’s disclosure regulations require that when a company discloses material
non-public information to security analysts and stockholders who may well trade on the basis of the information, it must
also make a simultaneous disclosure of that information to the general public
- disclosure regulations: requires companies making a public disclosure of material non-public information to do so fairly
without preferential recipients
- material non-public information: any information that could reasonably be expected to affected the price of a security
17.2 Financial Statements
- financial statements reveal hard facts about a company’s operating and financial performance
- OSC requires timely dissemination of financial statements to the public
- firm’s balance sheet, income statement, and cash flow statement are essential reading for security analysts
- balance sheet: provides a snapshot view of a company’s assets and liabilities on a particular date
- income statement: measures operating performance over an accounting period, usually a quarter or a year, and
summarizes company revenues and expenses
- cash flow statement: reports how cash was generated and where it was used over the accounting period
The Balance Sheet
Fixed Assets Accounting Style Numeric Style
Plant Facilities $35,000 $35,000
Production Equipment 20,000 +20,000
Administrative Facilities 15,000 +15,000
Patents 10,000 +10,000
Accumulated Depreciation (20,000) -20,000
Total Fixed Assets $60,000 $60,000
- common to both numerical columns, an underline indicates that the numbers listed above should be summed
- however, accounting notation omits the “+” sign and “-“ sign, and it is indicated by parentheses “( )” instead
- asset categories include: current assets, fixed assets, goodwill, and other assets
- current assets: cash or items that will be converted to cash or be used within a year (for example, inventory will be sold,
accounts receivable will be collected, and materials and supplies will be used within a year
- fixed assets: have an expected life longer than one year and are used in normal business operations (they may be
tangible or intangible), tangible fixed assets include property, plant, and equipment, intangible assets include rights,
patents, and licenses
- except for land, all fixed assets normally depreciate in value over time
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