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Principles of Finance Videos 166 videos
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Principles of Finance: Unit 3, What is Accrual and Why Do I Care? 11 Views
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Description:
Accrual accounting, as it relates to free cash flow, gives you options to buy back your stock, buy your competitors, or buy that fancy new motorized scooter you've had your eye on.
Transcript
- 00:00
principles of finance - a la shmoop. what is accrual accounting and why do I
- 00:07
care? all right well the $5 word of the day is accrual. and note that you accrue
- 00:13
at your own peril if you act crew too aggressively or to passively when you [accrue defined]
- 00:19
depreciate that tractor factory. think accrual is the Lazarus anti to lien of
- 00:25
cash accounting or something like that. all right free cash flow is the Golden
Full Transcript
- 00:29
Goose . and in the management of companies it is the smell of napalm in the morning.
- 00:36
all right well when you have free cash flow you have options. you can buy back
- 00:40
your own stock. you can buy your competitors and raise prices or lower
- 00:45
expenses or both. or you could raise your dividend or just pay one if you weren't.
- 00:49
in any outcome free cash is generally happy cash. right well the goal here is
- 00:53
to magically convert accrual basis earnings into cash generated from or
- 00:59
consumed by operations. so how do we do that? all right we're gonna delve into [cash in a melting pot]
- 01:04
Mattel corporation yes the makers of Barbie and Ken in the Easy Bake Oven.
- 01:09
just because we think it's so odd that these gender and racial stereotypes
- 01:14
still get sold to the young people of this country and around the world. oh and
- 01:18
because Mattel is pretty easy to understand. they basically remould cheap
- 01:22
plastic into a relatively expensive representations of humans and then sell
- 01:27
them on the web and in toy stores around the world. well here's a recent set of
- 01:32
filings glanced through the balance sheet and the statement of operations-
- 01:35
fancy name for income statement. and get quickly to the consolidated statements [income statements stacked]
- 01:40
of cash flows. note that this is yep consolidated .Mattel has many divisions
- 01:46
and does business in many countries and this consolidated thing is just a
- 01:50
mash-up of all of those discrete elements inside the company to produce
- 01:54
one document that everyone can look at. why is this good? well because you can't
- 01:58
invest only in Mattel Singapore. you can did Mattel corporation that's it. so the
- 02:05
good the bad the ugly they all go into soup that you are eating. think of that [ doll parts thrown in a soup]
- 02:09
when you slurp.
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