Accounting in Media and Information Firms
The chapter proceeds by presenting the major financial statements of organizations. Profit accounting is the first such document used for projects and limited partnerships. The other major financial documents for investors are the balance sheet, the income statement, the cash flow statement, and pro forma financial statements. There is a discussion as to how these financial statements are used to evaluate company performance and valuation, covering various ratios and metrics such as leverage, P/E, performance measures, and financial returns. A discussion of balance sheet assets follows. When it comes to liabilities, topics covered are stock options, pension plans, and off-balance-sheet financing. The chapter continues with income statements and their various definitions such as EBITDA, before dealing with managerial accounting—capital budgeting, profit centers, overheads, internal transfer pricing, and the tracking of costs. All of these accounting activities are assisted by an increasingly powerful information technology. The case study centers on Disney’s accounting practices.