FIN 305 Lecture Notes - Lecture 6: Dont, Statement Of Changes In Equity, Operating Cash Flow
13 Oct 2016
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Document Summary
Long term liabilities (ltl) impact cash flow after one year, but equity impact depends on mgt. Usually short term funds short term, long funds long, but asset and term financing mix are rarely equal. Most biz need permanent capital to finance stuff lenders won"t, like shitty collateral and startup costs and ip development. Must be funded through equity, which is always long term. Thus, lt block is important for big cap providers because highlights cost amounts of all. Equity is lt because unlike banks, no repayment sched. Liabilities: amounts biz owes to external parties--if long term, usually to financial creditors e. g. banks, leasing companies, maybe shareholders. These are expected to be paid back at a future date. Shareholders don"t just purchase shares, btw--they can also lend. Equity: first type of financing to go into biz, last to come out. Equity providers assume most of the risk because if biz fails, loss falls on them, not on lenders.
