Tracking Value with Accounts

1. Tracking Value with Accounts
Accounting
Michael Herlache MBA
Doctorate of Business Administration Candidate 2020
Tracking Value with Accounts
Accounting

2. Index
I. Value
II. Accounts and Accounting
III. Accounts, Accounting, & Excel
IV. Account Filings & Public Data
V. Account Statements: P&L
VI. Account Statements: Balance Sheet
VII. Account Statements: Cash Flow Statement
Tracking Value with Accounts
Accounting

3. I. Value
Strategics, financials, and entrepreneurs undertake investment with the
expectation of NPV & IRR. They accept projects that have positive NPV
and IRR higher than the cost of capital. They actively find and structure
positive NPV projects and then match financial products to them.
The positive NPV project is ideally a perpetuity with the value of the
business being the perpetuity value:
Perpetuity value = PMT / Discount rate
Tracking Value with Accounts
Accounting

4. II. Accounts and Accounting
In order to track valuation performance of the business (ideally
perpetuity), companies create accounts for each item of it’s financial
existence. These accounts are the basis of valuation. Valuation is the
basis of actions taken in a capitalist economy.
Tracking Value with Accounts
Accounting

5. III. Accounts, Accounting, & Excel
Excel is the software used to model the accounts of the enterprise and
determine the valuation of the business (perpetuity)
Tracking Value with Accounts
Accounting

6. IV. Account Filings & Public Data
10-K Annual
10-Q Quarterly
Tracking Value with Accounts
Accounting

7. V. Account Statements: P&L
Income Statement (P&L):
Revenues
COGS
Gross Profit
Operating Expenses
EBIT
Interest Cost
EBT
Taxes
Earnings
Tracking Value with Accounts
Accounting

8. V. Account Statements: Balance Sheet
Balance Sheet:
Assets = Liabilities + Shareholder’s Equity
Total Assets = Total Liabilities + Total Shareholder’s Equity
Current Assets + Long Term Assets = Current Liabilities + Long Term Liabilities + Value of Shares Previously Issues + Retained Earnings – Treasury Stock
Tracking Value with Accounts
Accounting

9. V. Account Statements: Cash Flow Statement
Cash Flow Statement:
CF from Operating
CF from Investing
CF from Financing
*The Cash Flow Statement is the linkage between the IS and BS
**D&A from cash flow statement (CF from Operating) and get CAPEX (CF
from Investing)
Tracking Value with Accounts
Accounting