Case 2
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- Category: Other
- Date Submitted: 02/21/2014 03:42 AM
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models
In this topic we are going to translate the accounting information into financial information.
The financial function of the company is to decide the assets to be acquired, how to do it’s financing and the total volume of investment to be achieved.
An investment is an expense of differed consumption. In other words, it is something that you buy in order to get future income from it. So an investment is an asset. There are two types of investment, short and long term, what is the same to say current assets and fixed assets.
Financing is the amount of money the company borrows to do an investment (or to buy an asset) so it is a liability. There are three types of financing, equity and long term (or non-current) liabilities, that are long term, and current liabilities that are short term.
Duality investment principle: Every investment is an asset which must have a corresponding liability involving the same amount of money. What is the same to say “In order to buy something you need to have the money”
financial dynamics
Financial cycles are due to the investment-financing process. We need money to buy goods that in the future will give as more money to repay the money to our financial suppliers and to have more money to buy more goods.
There are different financial cycles depending on their duration:
Financial year cycle: Short term cycle related to the current assets. We consider inside this group:
Expenses and payments on current assets
Incorporation to productions
Income from product sales
Investment-amortization cycle: long term cycle related to the long term assets. In this group we can find:
Expenses on long term assets
Invested capital recovery=Depreciation (amortization)
Capital refund
Levels of income:
In this topic we are going to translate the accounting information into financial information.
The financial function of the company is to decide the assets to be acquired, how to do it’s financing and the total volume of investment to be achieved.
An investment is an expense of differed consumption. In other words, it is something that you buy in order to get future income from it. So an investment is an asset. There are two types of investment, short and long term, what is the same to say current assets and fixed assets.
Financing is the amount of money the company borrows to do an investment (or to buy an asset) so it is a liability. There are three types of financing, equity and long term (or non-current) liabilities, that are long term, and current liabilities that are short term.
Duality investment principle: Every investment is an asset which must have a corresponding liability involving the same amount of money. What is the same to say “In order to buy something you need to have the money”
financial dynamics
Financial cycles are due to the investment-financing process. We need money to buy goods that in the future will give as more money to repay the money to our financial suppliers and to have more money to buy more goods.
There are different financial cycles depending on their duration:
Financial year cycle: Short term cycle related to the current assets. We consider inside this group:
Expenses and payments on current assets
Incorporation to productions
Income from product sales
Investment-amortization cycle: long term cycle related to the long term assets. In this group we can find:
Expenses on long term assets
Invested capital recovery=Depreciation (amortization)
Capital refund
Levels of income: