I. Financial Management

Financial Management:

Financial Management

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Zenith Travel Balance Sheet December 31, 2010 Assets Current Assets Cash Marketable Securities Receivables Merchandise Inventories Prepaid Expenses Total Current Assets XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX Non-Current Assets Investments Property, Plant and Equipment Intangible Assets Other Assets Total Non-Current Assets TOTAL ASSETS Liabilities Current Liabilities Accounts Payable Notes Payable Accrued Expenses Unearned Income Total Current Liabilities Non-Current Liabilities Mortgage Payable Other Non-Current Liabilities Total Non-Current Liabilities XXX XXX XXX XXX XXX XXX XXX XXX Capital Z. Tuazon , Capital TOTAL LIABILITIES AND CAPITAL XXX XXX

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Zenith Travel Balance Sheet December 31, 2010 Assets Liabilities & Capital Current Assets XXX Noncurrent Assets XXX Total Assets XXX Current Liabilities XXX Noncurrent Liabilities XXX Total Liabilities XXX Z.Tuazon , Capital XXX Total Liabilities & Capital XXX

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Current Assets Properties that are convertible to cash and used within the year Arranged from most liquid to least liquid Cash Marketable Securities Receivables Inventory Prepaid Expenses

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1) Cash Includes: Money Other cash items Checks, bank draft Treasury warrants Current cash funds Checks not yet encashed by creditors

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Cash Excludes: Cash advances by the business or IOU’s by officers/ employees Post-dated checks Defective checks Restricted checks Time deposits maturing after the accounting period Noncurrent cash funds Cash overage/shortage Stale checks

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VALUATION OF Cash Cash on hand Cash in bank Cash in foreign bank Petty cash *Face value/converted amount *may be combined as Cash on Hand and in Bank Cash in Closed Bank *At recoverable amount

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CONTROL OF CASH Don’t delegate to one person the recording and handling of cash Payments should be in checks and petty cash Voucher system ORs, pre-numbered Sales Invoice Cash Registers Daily deposits Periodic audit

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2) Marketable Securities Excess cash within the year Temporary investments to earn additional money Forms: *Stocks issued by other companies-Dividends *Bonds -Interest *Commercial papers(short-term notes)-Interest

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3) Receivables Due from customers 1.Trade- from customers, sales -Account/Notes Receivable 2.Non-trade- from customers & others, other than Sales Ex: Interest receivable/ Advances Rent Receivable Advances to officers and employees

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4) Merchandise Inventories 1.Goods for Sale 5) Prepaid Expenses 1.Paid in advance 2.Economic benefit not yet realized 3.Considered as assets

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Non Current Assets 1) Investments Noncurrent asset Intended for Business advantage for a long period of time Examples: Stocks, bonds of other companies Stocks of affiliated cos. Or subsidiaries Advances to affiliated cos. / subsidiaries Investment in partnership Joint Venture Land Cash surrender value of Life Insurance Cash deposits (Long term and restricted) Noncurrent funds

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2) Property, Plant and Equipment Permanent and used for business Shown at net of accumulated depreciation Examples: Land, building, equipment, furniture and fixtures

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3) Intangible Assets Noncurrent assets Rights privileges and economic advantage to the owner Value and life of asset difficult to determine

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Sources of Intangible Assets Rights/ privileges granted by government or legal authority Examples: Copyright (author, artist, publisher) Franchise (public and private) Patent (investor) Trademark (signs, symbols) Trade name Leasehold (Long term rental) Leasehold improvement Organization cost Perceived managerial capability and customer satisfaction Examples: Goodwill (amortization)

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Liabilities 1.Current liabilities – payable within the year Trade and nontrade payables Unearned revenues or advance collection for goods and services which are due within the year 2.Long term liabilities – not due within the year Long term notes, bonds and mortgage payables

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3.Deferred credits or revenue – advance collection of income which are realizable beyond the accounting period 4.Estimated liabilities – may be current or long-term; valid and existing liabilities the amount or due date of which is not definite e.g. estimated pension payable, estimated additional taxes

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3.Contingent liabilities – possible liabilities which will depend on future circumstances, and therefore not yet considered as liabilities Disclosed in the Financial Statement as: Notes Parenthetical remarks Contra accounts (Notes receivable discounted) Ex. Notes receivable discounted, accounts receivable assigned, pending lawsuits, possible tax assessments

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Owners’ Equity Investment of the owner listed as his capital account Partnership – listing of capital of each partner Statement of changes in capital (sole or partnership) shows the additions or subtractions from capital account

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Stockholders’ Equity – capital account in a corporation. Does not include: 1. Authorized Capital Stock- authorized stock to be sold by a corporation as indicated in its charter or by-laws 2. Outstanding Capital Stock-issued stock in the possession of stockholders

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Stockholders’ Equity is composed of: 1. Paid - in Capital 2. Retained Earnings

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Paid-in Capital Stock Total amount of investments by the owners (stockholders) Cash/other assets investment in exchage for capital stock Capital stock (evidence of ownership in part in the form of stock certificates)

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Stock certificate – in denomination of 1 share or any number of shares and may have a stated par value per share Par value or Stated value – minimum amount per share chosen by the corporation; this can be withdrawn only through a special legal action

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Additional Paid-in Capital Excess of stockholders’ investment to the par value of shares Not a profit, but addition to capital stock in Balance Sheet presentation

Types of Capital Stocks:

1.Common Stock – basic capital stock issued by corporations Unlimited increase in value depending on profitability of the business Rapid decrease in value in times of business losses Gives the owners voting rights, dividends, and share in corporate assets upon liquidation Types of Capital Stocks

Types of Capital Stocks:

2. Preferred stock – additional shares issued by a corporation to attract more investors Has priority in dividend distribution and assets upon liquidation Shown as first item in the Stockholders’ Equity presentation May or may not have par value Types of Capital Stocks

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Retained Earnings Accumulated net income of a corporation Reduced by the amount of losses Reduced by declared dividends Direct link between income statement and balance sheet Negative retained earnings means Deficit Positive retained earning for business expansion

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