Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following should be included in the capital budgeting process?

Recording dividends received from investments as revenue

Calculating the net present value (NPV) of the project

Estimating future cash flows from the investment

Ignoring the time value of money in decision-making

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Verified step by step guidance

Understand the concept of capital budgeting: Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the firm's goal of maximizing shareholder wealth. It involves analyzing potential projects or investments to determine their profitability and feasibility.

Identify the key components of capital budgeting: These include estimating future cash flows, assessing the time value of money, calculating metrics like Net Present Value (NPV) or Internal Rate of Return (IRR), and making decisions based on these analyses.

Step 1: Estimating future cash flows: This involves forecasting the expected inflows and outflows of cash associated with the investment or project over its lifetime. Accurate estimation is crucial for evaluating the project's profitability.

Step 2: Calculating the Net Present Value (NPV): NPV is a method used to evaluate the profitability of an investment by discounting future cash flows to their present value using a discount rate (often the cost of capital). The formula for NPV is:

NPV = \sum C_{t} / {(1 + r)}^{t} - C

₀, where Ct represents cash inflows, r is the discount rate, t is the time period, and C0 is the initial investment.

Step 3: Incorporating the time value of money: The time value of money is a fundamental principle in capital budgeting. It recognizes that a dollar today is worth more than a dollar in the future due to its earning potential. This principle is applied through discounting future cash flows to their present value.