Beruflich Dokumente
Kultur Dokumente
Chapter 2
• Financial Statements,
Taxes, and Cash Flow
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Chapter Outline
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Figure 2.1
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LONG-TERM DEBT
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RETAINED EARNINGS
The Boardwalk Boutique has beginning retained
earnings of $32,600. For the year, the company
suffered a net loss of $1,300 and paid out dividends
of $500. The company also issued $2,500 worth of
new stock. What is the value of the retained earnings
account at the end of the year?
a. $28,300
b.$30,700
c. $30,800
d.$33,300
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SHAREHOLDERS’ EQUITY
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Slide 25 Example: U.S. Corporation
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Thinking Questions
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1- Liquidity
2- Debt Versus Equity
3- Market vs. Book Value
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1- Liquidity:
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BOOK VALUE
Michaela’s has cash of $900 and accounts receivable
of $1,300. The inventory cost $4,200 and can be sold
today for $6,100. The fixed assets were purchased at a
cost of $42,800 of which $18,300 has been
depreciated. The fixed assets can be sold today for
$19,500. What is the total book value of the assets of
Michaela’s?
a. $27,800
b.$30,900
c. $32,800
d.$37,600
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MARKET VALUE
The financial statements of Bruce’s Antiques reflects
cash of $21,300, collectible accounts receivable of
$37,700, accounts payable of $45,900, inventory of
$63,300, long-term debt of $80,000, and net fixed
assets of $123,400. The firm estimates that if they
wanted to cease operations today that they could sell
the inventory for $48,000 and the fixed assets for
$99,000. What is the market value of the assets?
a. $80,100
b.$119,800
c. $206,000
d.$236,700
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Klingon Corporation
KLINGON CORPORATION
Balance Sheets
Market Value versus Book Value
Book Market Book Market
Assets Liabilities and Shareholders’
Equity
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Example: U.S. Corporation Slide 25
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INCOME STATEMENT
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INCOME STATEMENT
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•15(50,000) = 7,500
•.25(25,000) = 6,250
•.34(25,000) = 8,500
•.39(50,000) = 19,500
Total 41,750
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CF to Creditors + CF to Stockholders
CF to Creditors = interest paid – net new
borrowing
70 – 46 = $24
CF to Stockholders = dividends paid – net
new equity raised
103 – 40 = $63
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A Company has compiled the following information:
2005 2006
Sales $3,813 $4,019
Long-term debt 1,555 899
Interest paid 121 143
Common stock 1,500 2,150
Accounts receivable 498 402
Depreciation 306 393
Cash 413 911
Inventory 1,516 1,533
Accounts payable 387 460
Retained earnings 1,700 1,550
Cost of goods sold 2,123 2,609
Net fixed assets 2,715 2,213
Other costs 391 514
Taxes paid 305 126
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Quick Quiz
• What is the difference between book value
and market value? Which should we use for
decision making purposes?
• What is the difference between accounting
income and cash flow? Which do we need to
use when making decisions?
• What is the difference between average and
marginal tax rates? Which should we use
when making financial decisions?
• How do we determine a firm’s cash flows?
What are the equations and where do we find
the information?
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