My definition:

“The art of allocating resources from where

they are to where they are needed, in the most
effective and efficient way.”

From Google:
“A branch of economics that studies the
acquisition and effective use of money over
time by an individual, corporation,
organization or state.”
 CORPORATE FINANCE
Within a corporation. May include budgeting, financing, treasury,
accounting, taxes.

INVESTMENTS
Managing personal or corporate financial assets.

 FINANCIAL INSTITUTIONS
Banks, brokers, insurance companies, auxiliary institutions.

 INTERNATIONAL FINANCE
International specialization of the above.

 GOVERNMENT
Budgets, financing, taxes, accounting.
 Profit Maximization Businesses.

 Non-Profit Organizations.

 Social Businesses

 Governments and Government Entities.

 Financial Sector: Bring financial resources
from where they are to where they are
needed.

Other Sectors: Industry, commerce,

services, primary.
Users of financial services and products.
Generally where the resources are needed.
 Corporate Finance
 Treasury
 Financial Planning
 Strategic Planning
 Projects
 Accounting and taxes

 Government
 IRS
 Budgeting
 Accounting
Private Financial Sector
 Banks
 Stock Brokers
 Auxiliary Institutions

Public Financial Sector

 Development Banks
 Banco de México
 SHCP
 Control its own resources.
 Monitoring viability.
 Decision making.
 Fair information (shareholders,
managers, debt holders,
employees, authority, IRS/SAT,
society, tax payers, benefactors).
 Evaluation of the past present and future
financial situation of an entity (corporation,
person, government, NGO, etc.)

 The objective is to find weaknesses that can

lead to future problems and strengths that
can help to avoid or solve those problems,
as well as to reach viability and success.
 They describe the
financial shape of
the entity.
 Basic tool for the
financial analyst.
 They should be
understood before
trying to reach
conclusions.
 Income Statement.

 Balance Sheet

 Cash Flow Statement

 For a period of time.
 Shows the profit (loss) generated by a
company during a period of time.
 Shows how capable is the corporation
to make a profit out of its sales or
cash inflows.
 Informs how much is spent to
generate that profit.
Net Sales $51,224
- Cost of Sales 38,162
Gross Margin 13,062
- Selling Expenses 3,100
- Management Expenses 4,853
- Depreciation 498
Earnings Before Interests and Taxes (EBIT) 4,611
- Financial Expenses 1,237
Earnings Before Taxes (EBT) 3,374
- Taxes 1,606
Net Earnings (Net Income) 1,768
 For a moment in time.
 Shows the financial situation at that
moment.
 Shows the value of goods, rights and
liabilities of the corporation at that
moment, as well as the value of the
shareholders rights.
 ASSETS LIABILITIES AND EQUITY
Current Assets Current Liabilities
Cash 1,654 Bank Loans 4,281
Accounts Receivable 9,921 Accounts Payable 3,418
Inventories 12,217 Other Short Term 3,110
Advance Payments 247 Total CL $10,809
Total CA $24,039 Long Term Debts
Fixed Assets Banks Long Term $10,647
Machinery & Eqpt 12,261 Shareholders’ Equity
-Depreciation -7,638 Capital Stock 2,000
Building 2,140 Retained Earnings 5,578
Total FA $6,673 Period Earnings 1,768
Total SE $9,346
Total Assets $30,802 Total Liabilities + SE $30,802
For a given period, it will help us answer questions
like:

1. Where did the money collected go?

2. Why didn’t we pay more dividends?
3. Why did we get a loan? What for?
4. How was the new plant or equipment financed?
5. How were we able to pay debt?
6. Where did the partners’ money go?
7. Why are we out of money if we made a profit?
Cash balance at beginning of period
plus:
Cash Sources
minus:
Cash Applications
equals:
Cash balance at end of period

+ - =
1. Operations.
2. Loans.
3. Selling Assets.
4. Stockholders.
1. Operations.
2. Debt Service.
3. Buying Assets.
4. Dividens or Other Payments to
shareholders.
 What do we need to obtain it?

1. Income Statement for the Period. To know

the results of the operations and the
payment of dividends.
2. Two Balance Sheets, one at the beginning
and one at the end of the period, to know
the changes in assets, liabilities and capital
accounts.