Intermediate 2

In: Business and Management

Submitted By marianasalazar
Words 5225
Pages 21
Chapter 3, 13th edtion

Financial Statements, Cash Flow, and Taxes

Learning Objectives

After reading this chapter, students should be able to:

◆ List each of the key financial statements and identify the kinds of information they provide to corporate managers and investors.

◆ Estimate a firm’s free cash flow and explain why free cash flow has such an important effect on firm value.

◆ Discuss the major features of the federal income tax system.

Lecture Suggestions

The goal of financial management is to take actions that will maximize the value of a firm’s stock. These actions will show up, eventually, in the financial statements, so a general understanding of financial statements is critically important. Note that Chapter 3 provides a bridge between accounting, which students have just covered, and financial management. Unfortunately, many non-accounting students did not learn as much as they should have in their accounting courses, so we find it necessary to spend more time on financial statements than we would like. Also, at Florida and many other schools, students vary greatly in their knowledge of accounting, with accounting majors being well-grounded because they have had more intense introductory courses and, more importantly, because they are taking advanced financial accounting concurrently with finance. This gives the accountants a major, and somewhat unfair, advantage over the others in dealing with Chapters 3 and 4 on exams. We know of no good solution to this problem, but what we do is pitch the coverage of this material to the non-accountants. If we pitch the lectures (and exams) to the accountants, they simply blow away and demoralize our non-accountants, and we do not want that. Perhaps Florida has more of a difference between accounting and non-accounting students, but at least for us there really…...

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