 2.1 What is a Financial System?  2.2 The Flow of Funds  2.3 The Functional Perspective  2.4 Financial Innovation & the “Invisible Hand”  2.5 Financial Markets  2.6 Financial Market Rates  2.7 Financial Intermediaries  2.8 Financial Infrastructure and Regulation  2.9 Governmental & Quasi- Governmental Organizations

 3.1 Functions of Financial Statements  3.2 Review of Financial Statement  3.3 Market values v. Book Values  3.4 Accounting v. Economic Measures of Income  3.5 Return on Shareholders v. Return on Book Equity  3.6 Analysis Using Financial Ratios  3.7 The Financial Planning Process  3.8 Constructing a Financial Planning Model  3.9 Growth & the Need for External Financing  3.10 Working Capital Mgmt.  3.11 Liquidity & Cash Mgmt

Chapter 2 Contents What is a Financial Financial Market Rates System Financial Intermediaries The Flow of Funds Financial Infrastructure The Functional and Regulation Perspective Governmental& Quasi- Financial Innovation Governmental the“Invisible Hand

INTRODUCTION I CONSIDERING LEGAL ORIGINS A The Classic Differences B Legal Origins and Financial Progress i Protecting M inority Stockholders via Fiduciary Duties 2 Overregulating Financial M arkets C The Differences Erode D Can Legal Origin Anchor Law as the Primary Cause? II STATE POWER AND LEGAL ORIGIN IN THE TWENTIETH CENTURY A The Rise of the Regulatory State in the Twentieth Century B The Power of the State i A Timeline of State Power in the Twentieth Century 2 Timelines of Government Budgets, Government Transfers, and Financial M arkets 3 Regulating Financial and Labor M arkets 4 Instruments and Power C Which System Regulates Securities M arkets M ore? i Regulatory Budgets 2 T he S E C 4 II REEXAMINING THE DATA: DO POLITICAL ECONOMY DIFFERENCES BETTER EXPLAIN FINANCIAL DIFFERENCES? A Reexamining Legal Origins as Predicting Ownership Separation in the W ealthy W est i Corporate Law, Legal Origin, and Legislative Policy 2 The World W ars 3 Invasions and Military Occupation: The Tw

• Part A: Introduction of Financial Management Objective of manager and role of financial markets Given cash flows and discount rates, finding present value • Part B: Valuation of Financial Securities • Part C: Analysis of the determination of risk-adjusted discount rates • Part D: Analyze how a firm’s financial decisions affect its value

Task Team of FUNdaMENTAL aCCOUNtIng School of Business. Sun Yat-sen University Lesson 9 Financial Statements Self-Test 1. True or false 1) Financial statements are standard documents that tell us, in financial terms, how well a business is performing and where it stand 2) Net income equals total revenues and gains less total expenses and losses

Outline Demand and supply of financial analysis Basic analytical procedures Analysis methods Comprehensive analysis of financial ratios The limitations of financial analysis

Lesson notes Lesson 9: Financial Statements Learning objectives 1. Learn what financial statements are and how these accounting tools work in their future profession 2. Be acquainted with the functions and formats of these financial statements 3. Learn some details relating to preparation of these financial statements

Chapter 1 Introduction to Financial Management Chapter 2 Financial Statements, Taxes, and Cash Flow Chapter 3 Working With Financial Statements Chapter 5 Introduction to Valuation: The Time Value of Money Chapter 6 Discounted Cash Flow Valuation Chapter 7 Interest Rates and Bond Valuation Chapter 8 Equity Markets and Stock Valuation Chapter 9 Net Present Value and Other Investment Criteria Chapter 10,11 Making Capital Investment Decisions Chapter 12 Some Lessons from Capital Market History Chapter 13 Risk and Return Chapter 15 Cost of Capital Chapter 17 Leverage and Capital Structure Chapter 18 Dividends and Dividend Policy Chapter 19 Short-Term Financial Planning Chapter 20, 21 Working Capital Management

Finance: A Quick Look Business Finance and The Financial Manager Forms of Business Organization The Goal of Financial Management The Agency Problem and Control of the Corporation Financial Markets and the Corporation