The document discusses financial management and management accounting. It defines financial management as measuring and reporting financial and non-financial information to help managers make decisions to fulfill organizational goals. Management accounting also measures and reports this information, but focuses on internal reporting to help managers make decisions. The document outlines the objectives, functions, key themes, and differences between financial and management accounting. It provides examples of a fund flow statement and cash flow statement, explaining their purposes and how they are computed.

2. Financial Management It measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization.

13. Management Accounting and Financial Accounting Help managers plan and control business operations Help investors, creditors, and others make investment, credit, and other decisions 2. Purpose of Information

14. Management Accounting and Financial Accounting Relevance Reliability, objectivity, and focus on the past 3. Focus and Time Dimension

15. Management Accounting and Financial Accounting Internal reports not restricted by GAAP Financial statements restricted by GAAP 4. Type of Report

16. Management Accounting and Financial Accounting No independent audit Annual independent audit 5.Verification

17. Management Accounting and Financial Accounting Detailed reports on parts of the company Summary reports primarily on the company as a whole 6.Scope of Information

18. Management Accounting and Financial Accounting Concern about how reports will affect employees behavior Concern about adequacy of disclosure 7.Behavioral Implications

19. Fund Flow Statement

20. Fund Flow Statement FFS is a method to study changes in the financial position of a business enterprise between beginning and ending financial statements dates. IT is a statement showing sources and uses of funds for a period of Time. Anthony “ The fund flow statement describes the sources from which additional funds were derived and the use to which these sources were put.”

21. A summary of a firm’s changes in financial position from one period to another; it is also called a sources and uses of funds statement or a statement of changes in financial position . Fund Flow Statement

25. Current Assets: Cash in hand Cash at bank Bills Receivable Sundry Debtors Temp. Investments Stocks/Inventories Prepaid Expenses Accrued Incomes Total Current Assets Current Liabilities: Bills Payable Sundry Creditors Outstanding Expenses Bank Overdraft Short-term Expenses Dividends Payable Proposed dividends Provision for taxation Total Current Liabilities Working Capital(CA-CL) Net increase or decrease in working capital Effect of working Capital Increase Decrease Current Year Previous Year Particulars Statement of schedule of changes in working capital

27. Cash Flow Statement

81. Ratio Analysis

82. Ratio Analysis The key concept of ratio analysis is establishing the relationship of one number to another number.

87. TYPES OF RATIOS: PROFITABILITY RATIOS

88. TYPES OF RATIOS: PROFITABILITY RATIOS

89. TYPES OF RATIOS: FINANCIAL STABILITY

93. Debt Ratio The debt ratio measures the proportion of company’s assets financed by debt. Total liabilities ÷ Total assets

94. Debt Ratio Debt ratio = Total liabilities ÷ Total assets The debt ratio indicates the proportion of assets that is financed with debt. This ratio measures a business’s ability to pay total liabilities A low debt ratio is safer than a high debt ratio.

95. Debt-to-Equity Ratio This ratio expresses the relationship between liabilities and equity. Total liabilities ÷ Total equity

101. Current Ratio Current ratio = Total current assets ÷ Total current liabilities The current ratio measures the company’s ability to pay current liabilities with current assets. Rule of thumb: A strong current ratio is 2.00.

103. Current Liabilities Current liabilities are obligations due within one year or within the company’s normal operating cycle if it is longer than one year.

104. Current Liabilities Accounts payable Short-term notes payable Sales tax payable Current portion of long-term debt Accrued expenses Payroll liabilities Unearned revenues

105. Current Liabilities Accounts payable are amounts owed to suppliers for goods or services purchased on account. Short-term notes payable are notes payable due within one year.

106. TYPES OF RATIOS: OTHER RATIOS