chapter 3 accounting and finance 会计和财务概要1.pptVIP

Off-balance sheet assets and liabilities - Firms may hide large amounts of resources in off balance sheet accounts in order to hide potential liabilities (or assets) from the public. Example: Enron Mark-to-market accounting – Many assets and liabilities are valued at their historic cost, not at their current values. This may make it more difficult to accurately value the firm. * * 20 * 23 * 24 * 26 * * 2 3-* Accounting Practice Grey areas for financial managers: Revenue recognition Cookie-jar reserves 3-* Accounting Practice Additional grey areas for financial managers: Off-balance sheet assets and liabilities - Not put in b/s (derivatives) Mark-to-market accounting - fair value of an asset based on the current market price?(not book value) Taxes Taxes have a major impact on financial decisions Marginal Tax Rate is the tax that the individual pays on each extra dollar of income. Average Tax Rate is the total tax bill divided by total income. Taxes Example - Taxes and Cash Flows can be changed by the use of debt. Firm A pays part of its profits as debt interest. Firm B does not. Firm A Firm B EBIT 100 100 Interest 40 0 Pretax Income 60 100 Taxes (35%) 21 35 Net Income 39 65 Taxes FOOD FOR THOUGHT - If you were both the debt and equity holders of the firm, which would generate more cash flow to you? (assume Net Income = Cash Flow) Firm A Firm B EBIT 100 100 Interest 40 0 Pretax Income 60 100 Taxes (35%) 21 35 Net Income 39 65 ? Taxes FOOD FOR THOUGHT - If you were both the debt and equity holders of the firm, which would generate more cash flow to you? (assume Net Income = Cash Flow) Firm A Firm B Net Income 39 65 + Interest 40 0 Net Cash Flow 79 65 ? Corporate Tax Rates (2008) Personal Tax Rates (2008) 3-* Personal Tax: Example What is the average tax rate for an individual with a net income of $50,000 and a total tax liability of $10,704.50? 3-* The Problem of “Double Ta