Finance and Accounting for Nonfinancial Managers: All the Basics You Need to Know

Finance and Accounting for Nonfinancial Managers: All the Basics You Need to Know

Language: English

Pages: 336

ISBN: 0465078982

Format: PDF / Kindle (mobi) / ePub


Packed with step-by-step examples and illustrative case studies, and updated to reflect the latest changes in economic policy and the financial landscape, Finance and Accounting for Nonfinancial Managers is a nuts-and-bolts guide for managers, entrepreneurs, seasoned executives, teachers, and students alike. William G. Droms and Jay O. Wright’s definitive guide to financial analysis and management is now revised throughout and features a new chapter on the Dodd-Frank Act and JOBS Act, bringing the book up to date for the post-recession economy while still covering all major aspects of financial management, including:
• Reading a Balance Sheet
• Mastering the Accounting Cycle
• Making Long-term Investment Decisions
• Conducting Breakeven Analysis for Profit Planning
• Calculating the Cost of Capital
• Evaluating Closely Held Companies and much more.

 

 

 

 

 

 

 

 

 

 

 

largest corporate bankruptcies in history and, amid allegations of fraud and criminal conspiracy related to the failure of Enron, the once venerable accounting firm of Arthur Andersen and Company essentially disintegrated after being convicted of criminal behavior related to its audits of Enron. Andersen, a nearly 100-year-old firm founded in Chicago at the turn of the last century, was the fifth largest of the world’s “Big Five” accounting firms. In late August of 2002, a key assistant to the

racing suspensions, causing his annual fixed costs to rise to $1,920. At the same time, assume that variable costs per unit decline to $340. The new contribution margin is thus $160 per unit, and the new breakeven point is found as follows: This new breakeven level is shown graphically in Exhibit 8.2. At the new level of operations, the breakeven point is one unit higher than the old level. At high levels of operations—say, production of thirty units—profits under the new cost-volume-profit

of theoretical explanations for the term structure of interest rates. The liquidity preference theory states that long-term interest rates should be higher than short-term interest rates due to the liquidity preferences of lenders and borrowers. In an uncertain world, lenders normally prefer to lend short-term rather than long-term because of the greater liquidity of short-term debt. Lenders may get locked in to long-term debt agreements during periods of rising interest rates, suffering losses

methods may be viewed as mutually supportive and mutually consistent. However, there are three important circumstances under which the methods may yield conflicting decisions. These circumstances occur fairly rarely and will be discussed only briefly here. The first circumstance arises when one must choose from among mutually exclusive investment projects with similar costs but radically differing time patterns of cash inflows. For example, one project providing large cash flows in the early

that the 12 percent capitalization rate (.22 - .10 = .12) results in a multiple of 8.3 times earnings in the year 2009 (at a 10 percent growth rate, earnings in year 2009 = earnings in year 2008 times 1.1 = $631,730). The present value of V5 ($5,264,417) discounted back to year one is: The total value of HMC is then the sum of the present value of the next five years’ earnings plus the present value of V5, as follows: This valuation approach places a fairly high valuation on Home Medical

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