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Rob's e2700 Notes

🧭 Sign Conventions

Rule #1: When in doubt, ask Rob.

Rule #2: Don’t use any information that you weren’t given in this course. DO NOT use sign conventions you learned in your accounting course. All of Bruce’s courses are self-contained in order to decrease the load on students, meaning that you should only be using information that you were given by Bruce or I. Further, this is not an accounting course.

Rule #3: Follow the conventions in the slides.

Rule #4: There are two ways to enter numbers

  • In fill-in-the-blank questions and data tables, use regular English conventions because they are not financial statements. You will do this 96% of the time.
  • In financial statements, use the following sign convention, drawn from Bruce’s slides. This convention echoes accounting practice and is also used in Rob’s spreadsheet: “On an income statement anything that increases net income is positive and anything that decreases net income is negative. On a statement of cash flows, anything that increases cash flow is positive and anything that decreases cash flow is negative.” This convention may also be used in incremental and pro-forma financial statements. When in doubt, do not hesitate to ask.

Question 10 of PS 3

Elmdale Enterprises is deciding whether to expand its production facilities. Although​ long-term cash flows are difficult to​ estimate, management has projected the following cash flows for the first two years​ (in millions of​ dollars):

Data Table

Read the prompt carefully. Note that it is a Data Table. Note also that it doesn’t follow the conventions of any financial statement, so it’s just a table.

Therefore, when it says that depreciation is 21.7 and you are told that it is in millions, that means that depreciation is 21.7 million.

However, whenever you want to enter data into a table, definitely ask me.